.png)
.png)
Would IHT be incurred on monies held in client account?
My late client and her partner, who were not married, purchased a house in which they lived as their permanent residence as ‘tenants in common’.
My client passed away in July 2023 leaving her surviving partner living in the property. He then decided to sell the property in December 2023 and moved to another property using his own finances and not the proceeds from the sale of the jointly owned property.
On completion of the sale of the jointly owned property, the proceeds of the sale was £440,000. Fifty per cent of the proceeds passed to her surviving partner and the remaining 50% was deposited into a ‘client account’ with the solicitors dealing with my late client’s will for the benefit of her four children – where the money still remains.
There are three named trustees on the ‘life interest trust’.
The surviving partner is considering terminating the ‘life interest trust’ but he is concerned that he may incur inheritance tax on the 50% of the proceeds of the sale held in the ‘client account’.
Can readers advise me as to whether he would or would not incur inheritance tax on the £216,000 held in the ‘client account’?
Query 20,471 – Loom.
Dispute over the allocation of profits among partners.
I act for a highly profitable partnership of three otherwise unconnected individuals. I also act for one of the three individuals in respect of her personal tax. The other two partners are represented by two different firms.
There has been a big disagreement between the partners over the allocation of profits, which has not been resolved. I waited as long as I could before submitting the partnership return for 2023-24 but I did eventually submit it with the profit allocation advised to me by the reporting partner (who is not my client).
I advised the three partners of the figures to include on their tax returns. I don’t know whether the two partners who I don’t represent personally will have used them. The partner for whom I act believes that she was entitled to a greater profit share than the one allocated to her and wants to take things further.
I am aware that there is a process under TMA 1970, s 12ABZB for such disputes to be referred to the tribunal but I have never seen it used.
Do readers have any experience of how this might work so that I can understand what is likely to happen? I fear that I am going to get caught in the middle in all of this but I can’t see a way out.
What do readers think?
Query 20,472 – Worried.
Will shareholders be eligible for BADR?
A client trading company (financial services) was voluntarily struck off just under six years ago. The director/shareholder claimed business asset disposal relief (BADR) on the assets of some £300,000.
Some years prior to the liquidation, the company had entered into an arrangement with a platform to pass business through. In return, shares were allotted to the company, although these had no value at the time and it was never expected they would have. The shares were never mentioned during the liquidation process.
Last year, the director became aware the shares now had a significant value and that some large dividends had been voted but had not been paid to the company as the platform had no contact details when the payments were bounced back from the bank. The platform was not able to transfer the shares nor dividends to the company shareholders, which meant the only solution was to have the company reinstated, which has now been done. It has been advised that the company is now in the exact position it was when it was originally struck off. Accounts will need to be filed for each year from the original liquidation. Once this has been done, a second liquidation will be carried out.
Some questions need to be considered:
- Will the shareholders still be eligible for BADR? Probably another £400,000.
- Should the dividends all be credited in the final set of accounts or in the year the dividends were voted? No effect on the company tax position, so does it matter?
- The shares in the platform will be transferred to the shareholders as a distribution in specie. Presumably the CGT on the company will be in the final accounts based on the value transferred. Is that correct?
- Is there anything else to consider?
Query 20,473 – Bromfield.
How is VAT accounted for on goods hired out in Italy?
I have a client who makes supplies involving boats. He has won a contract in Italy, which means he will hire oars from a local supplier based in Venice and then rent them out to rowers and associations who take part in top-quality rowing events in Italy. The Italian supplier has confirmed that Italian VAT will be charged on the hirings to my client. I have two questions: 1) is there any need for my client to register for VAT in Italy; and 2) if not, will she charge UK VAT on these fees as they are B2C? She is already registered for VAT in the UK.
Also, if my client does not need to register for VAT in Italy, can she reclaim Italian VAT charged by the Venice supplier by making a 13th Directive claim to the Italian tax authorities?
Query 20,474 – Rower Rachel.
Queries and replies
Full T&Cs: tinyurl.com/RFguidelines.
