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Should client’s tax return show disposal of Paris home?
A client (UK tax resident), who owns a residential property in Paris, undertook a ‘usufruct’ in France, ie transferring ownership to his daughter while retaining the use of the property and the rental income arising from the property until he dies. The property was valued at €300,000 and the usufruct was valued at €150,000 on the date of transfer.
Our client paid French inheritance tax on the usufruct value of €150,000.
Should our client’s tax return show a disposal of €300,000 or a part disposal of €150,000 for capital gains purposes and who should declare the rental income after the transfer of ownership?Query 20,119 – Yana.
Tax treatment of business partnership holding property.
I was interested to read the reply in Readers’ forum ‘Selling farmland’ (Taxation, 9 March 2023).
I have a situation where a husband and wife are joint owners of the large portfolio of residential investment property in England. Some years ago we registered the business as a partnership with HMRC although the underlying ownership of the properties remains in joint names of the married couple. This was with a view to incorporating the business and possibly mitigating SDLT using the sum of the parts on SDLT relief in FA 2003, Sch 15 – which the couple have subsequently decided they do not wish to do. The property portfolio contains large capital gains. There are no borrowings.
Taking the point from CG30360 that interest in a partnership assets are not included for the purposes of TCGA 1992, s 62(1), does this mean that this situation is actually disadvantageous vis-à-vis a married couple? On death, they have each left their estate to the other. I am assuming, therefore, that there would be no CGT on death because of the exemption for transfers between married persons. Does this mean, though, that on the death of the last surviving spouse, the capital gains uplift would apply to the entire value of the property portfolio?
Also, in view of the fact that the couple are not now intending to incorporate their property portfolio, is there any disadvantage in simply advising HMRC that it is no longer a partnership as such and simply file two individual SA returns on the basis of jointly owned investment properties?
Query 20,120 – Landlord.
Application of the term ‘reckonable service’.
I am trying to decide the best way to deal with a lump sum from an Australian superannuation scheme.
My client worked in Australia for nine years (1992 to 2001) and was a contributor to a state authority superannuation scheme (SASS) in New South Wales (she was a non-resident in the UK for this period). She resigned in 2001 and returned to the UK and became UK resident. Now aged 60, she is entitled to withdraw a lump sum, tax free in Australia but taxable in the UK.
From what we can ascertain from HMRC and other online sources, it would seem there is a possibility of foreign service relief on the portion of the lump sum that has grown over the years, prior to 6 April 2017. It is the calculations I am having problems with – in particular the definition of ‘reckonable service’.
Since the SASS fund has grown in value from 2001 to 5 April 2017 does this mean the following:
- The reckonable service was from 1992 to 5 April 2017 (length of time as a member of the superannuation scheme as at 5 April 2017).
- The reckonable foreign service was from 1992 to 2001 (length of time employed and contributing to the superannuation scheme).
Alternatively, does this mean that reckonable service and reckonable foreign service are the same period (ie nine years), as this was the period of ‘employment’ (ie service) even though the fund continued to grow from 2001 to 2017, quite substantially?
Understanding these terms is key, as it could mean the difference between paying £33,000 in tax to HMRC or £0 tax on the portion of the lump sum prior to 5 April 2017. We are aware that the portion of the lump sum after 5 April 2017 will be taxed as foreign income.
What do other practitioners think?
Query 20,121 – Ozzy.
Three-country VAT problem with work on chimney.
One of my UK clients provides structural surveying services in connection with commercial chimneys. The company has just agreed a contract with an associated company based in Spain to provide services linked to a chimney in Ireland. The Spanish client will invoice the chimney owner, which is a manufacturing business in Dublin. The Spanish client has no premises or VAT number in Ireland, only in Madrid.
I am confused about the VAT procedures here: my initial advice to the client was that he would not charge UK VAT and the associated company in Spain would do the reverse charge on its Spanish VAT return, based on the Spanish rate of VAT. However, I am not sure, especially since Brexit has taken the UK out of the EU loop in three-party deals.
Can readers advise on the VAT outcomes here please?
Query 20,122 – Chimney Chap.
Queries and replies
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