Does re-imbursement of repair costs include VAT?
As a non-specialist contributor to Taxation magazine, I would like to pose a question. It seems to be accepted practice that re-imbursement of vehicle repair costs will include VAT if paid direct to a garage, or if the injured party claimant is VAT registered, but not if the claimant is not VAT registered.
This means to my mind that non-registered claimants pay the VAT to their own garage and are out of pocket on the claim to that extent, and the paying party gets its VAT liability paid for it by the injured party.
I can see no justification whatsoever for this practice. Where an intermediary, such as a loss adjuster is dealing with the case on behalf of a client, presumably they pocket the VAT which would otherwise have been paid and their unwitting client gets the blame.
Am I missing something?
Query 20,487– DP.
What part of fixed sum award is tax exempt?
We have a client who is affected by the Foskett Panel review. This review assessed the losses suffered by victim of fraud committed at one of the banks. The review found that the way the bank had dealt with the claims was unsatisfactory and recommended a process of assessing the losses. Further information can be found at the website: www.foskettpanel.com.
Our client accepted a fixed sum award. We understand that HMRC’s view is that the fixed sum award arises from the disposal of a chargeable asset. The chargeable asset being the ‘contractual rights arising under your re-review opt-in agreement’ and consequently is subject to capital gains tax and that HMRC considers it unlikely that there will be s 38 allowable expenditure.
Although we accept that the award is subject to capital gains tax, we have been considering whether there is scope to argue that the Zim Properties extra statutory concession (D33) could apply, on the basis that there was a right of action, and furthermore could it be argued that there was no underlying asset?
If there was no underlying asset, then the first £500,000 of the award would be exempt with only the excess being subject to capital gains tax. We would welcome readers’ views.
If we were able to rely on the Zim concession we appreciate that full disclosure on the relevant self-assessment tax return would need to be made.
Query 20,488 – Anon.
Amending articles of association.
A client has an existing investment company holding property and listed investments, which is largely funded by a directors’ loan from the shareholders but does have some unrealised gains.
The company has standard articles and husband and wife own the shares.
Minds have now turned to IHT planning and involving the next generation in owning shares in the company.
What tax aspects should we consider in deciding whether to amend the articles/shareholdings of the existing company, or to get the assets out and start again with a bespoke family investment company.
I have in mind that altering the rights attaching to close company shares is considered a chargeable lifetime transfer (CLT) for IHT. I also thought that we could raise debt in the existing company to finance repayment of the existing DLA which could then be used to fund the new FIC.
I’d be grateful for readers’ thoughts?
Query 20,489 – Dublin Dion.
Can charity register for VAT and claim refund?
I act for a charity whose only income is from donations and legacies, plus a major awards dinner it hosts each year. The dinner earns a surplus and is described as an ‘awards dinner’ rather than a ‘fundraising dinner’.
The profit and loss account is basically as follows:
Income
Ticket sales £80,000
Donations from supporters £40,000
Expenses
Venue hire £10,000
Caterer £70,000
Other costs £30,000
Surplus £10,000
All of the costs include VAT and I wonder if my client can voluntarily register for VAT and account for output tax on the ticket sales, claiming input tax on the expenses, a net refund of £5,000.
Output tax £80,000 x 1/6 less input tax £110,000 x 1/6 = £5,000.
I always say that if something sounds too good to be true, it usually is, but the refund seems fair. What do readers think?
Query 20, 490 – Charity Clare.
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