.png)
.png)
Share options
Registering an EMI share option scheme.
We have recently completed an EMI share option scheme for a client. The client structure is a holding company (Holdco) with a wholly owned trading subsidiary (Tradeco) and the options have been granted over shares in Holdco, although the option holders are actually employed by Tradeco.
I registered the scheme through HMRC’s employment related securities online service and submitted the 92 day notifications. I checked the legislation and ITEPA 2003, Sch 5 para 44(2) is quite clear that ‘the notice must be given by the employer company’, which in this case is Tradeco.
However, the annual return for 2021-22 is now due but Sch 5 para 52 states that the requirement for an annual return ‘applies in relation to a company whose shares are (or have been) subject to qualifying options’. This implies that it is Holdco which is required to make the annual return submission, which is inconsistent with the original notification and will involve additional administration in setting up a ERS registration for Holdco. Further, if I file the annual return via Holdco’s ERS registration and not under Tradeco’s registration then HMRC will presumably issue an automatic penalty to Tradeco for not filing an annual return.
I am hoping a reader can help shed some light on this.
Query 19,951 – Unsure.
Rollover
Treatment of rollover on gift of land to trust.
I have a client who bought a farm in 2010 and rolled over a gain into this purchase. Therefore, the base cost is considerably lower than the purchase price.
The client is now thinking about inheritance tax planning and we have discussed gifting this land to trust. Business tax relief should be available on the gift, but I am more concerned about the capital gains tax position.
Ordinarily TCGA 1992, s 260 holdover relief can be claimed on a gift to trust. But is such holdover relief still available if an asset has already had a gain rolled into it, meaning there should be no capital gains tax on the gift?
Any guidance from readers would be greatly appreciated.
Query 19,952 – Adviser.
Capital allowances
Capital allowance treatment on plant and machinery.
We have a sole trader client who is about to incorporate their business and is concerned about the potential capital allowance treatment on plant and machinery and successions.
This was the subject of an enquiry in Readers’ forum query 19,271, ‘Hanging in the balance’, Taxation, 18 November 2018, where it appears that if the plant and machinery is actually sold, this will preclude an election under CA 2001, s 266 because of s 265(3)(b) where mention is made of ‘and without being sold’ – although what is being sold in this sub-section is unclear. This begs the question of what is the point of s 266(3) which notes: ‘the election may be made whether or not any plant or machinery has actually been sold or transferred’?
For our sole trader, the plant and machinery cost £185,000 and has a tax written value of £32,000 and a market value of £120,000. The suggested planning is to make a s 266 election, but that the plant and machinery is introduced into the company by credit to the director’s loan account of £120,000 and that for corporation tax purposes the written down value the company uses in its accounts in its first period of trading is £32,000.
Does the £120,000 credit to the loan account represent sale proceeds and therefore negates the election if the interpretation as noted above of s 265(3) (b) is correct? Therefore, in the sole trader’s final accounts, a disposal value of £120,000 would then need to be brought into account creating a large balancing charge.
Is this interpretation correct?
Query 19,953 – Confused.
VAT on fees
VAT on eating disorder services for non-UK customers.
My client provides a treatment therapy service to private individuals with eating disorders. Much of her work is carried out by zoom sessions and she has both UK and non-UK customers. The customers outside the UK are both EU and non-EU.
I have always told her to charge VAT on all of her fees but a colleague thinks that the recent tribunal case of Gray and Farrar about matchmaking services means that she could probably ‘get away’ with not charging VAT on the fees to her non-EU clients and possibly EU clients as well. All of her sales are B2C; there are no business customers.
Could readers throw some light on the Gray and Farrar case? I can’t see why the services of a dating agency are similar to what my client does for her clients.
Finally, if she has overpaid VAT, can she go back four years and claim a rebate? Having read Neil Warren’s article in Taxation, 24 January 2022, ‘Input tax shocker’, I don’t think she would need to repay any input tax if her fees were non-VATable because they are VATable when charged to a UK customer.
Can readers provide assistance?
Query 19,954 – Protein Pat.
