Hello,
It is about time for a Directors' tax planning update, and this what we bring you this week. As usual it is packed full of really useful material and case summaries including a summary of COVID-19 measures.
We have also reviewed a selection of cases from the courts and tribunals which serve as cautionary tales for taxpayers and advisers, but mainly for advisers. They illustrate situations where family tax planning goes badly wrong for reasons which, with the great benefit of hindsight, do not seem unreasonable.
It is not common for HMRC to rescind an advance tax clearance when given, as usually clearance is not given in the first instance. But what happens in a family succession exercise when all the material facts are not disclosed and a company purchases the shares of its retiring owner for a cost well in excess of actual market value? The Boulting case, below, raises the issue and it looks like it may rumble on.
We regularly feature our guides to creating family investment companies. Often one family member, usually an accountant or lawyer, sets up the structure and then controls the family's investments. We flag up a past case to illustrate a potential pitfall where you could inadvertently create a settlor interested trust. The Bingham case, below, resulted in 14 years of discovery assessments.
These are both cases where it is not too easy to 'see the wood for the trees' because you are juggling different tax rules. The way to avoid being distracted by too many rules, is to stand back and ask 'Is this outcome reasonable?' Alternatively, you might obtain a second option. Hindsight is such a wonderful thing.
We have quite a few VAT items this time, including a missing trader VAT fraud case which demonstrates an example of where the corporate veil is pierced due to the fraudulent actions of a company director.
As we chalk off yet another extraordinary week in the history of humanity, do stay hopeful and safe.
If you have any tax-specific queries, please do post them up to our sister site: www.VtaxP.co.uk.
Back soon
Nichola Ross Martin FCA CTA (Fellow)
Tax Director
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Directors' tax planning: Update October 2020
A topical update on issues affecting directors, tax planning tips and potential problem areas. Read this in conjunction with our Directors' Tax Planning Toolkit for 2020/21 for a full round-up of new legislation and remuneration planning ideas.
Guides and Updates (subscribers)
Joint property: signpost
UPDATE: Jointly held property and the distinction between legal and beneficial ownership can cause confusion. There are a number of traps and factors to consider when determining who is taxable on income and gains. We have updated our guidance on the topic.
Family Investment Companies
UPDATE: Many families and High Net Worth Individuals (HNWIs) use corporate structures as a vehicle for holding and making investments commonly know as Family Investment Companies (FIC). This guide explains how they work.
How to gift your shares to the family
UPDATE: The tax rules allow the owner of a company to give away shares to their family. This guide explains how to gift your private company shares to members of your own family.
ABC or Alphabet shares: Family companies
This guide examines the tax consequences of creating new share classes in a family company in order to split income with a spouse or close family members.
Case Update (Freeview)
POS clearance voided: Shares overvalued
In John Walter Boulting & Others v HMRC [2020] EWHC 2207, a clearance for a purchase of own shares was declared void by HMRC. The company had valued the shares at "materially greater than market value" and not disclosed this. A claim for judicial review failed.
Joint income: Splitting income within the family
We are revisiting AJ Bingham v HMRC [2013] TC02528, a family tax planning exercise involving joint bank accounts which were designed to save income tax failed: the taxpayer had created a settlement.
VAT cases
Criminal director must pay VAT appeal costs
In Golden Harvest Wholesale Ltd v HMRC [2020] TC07847, a costs order of £45,000 was applied to a director, he caused a VAT appeal to be lodged which he knew to be hopeless.
VAT
Capital Goods Scheme
UPDATE: What is the VAT Capital Goods Scheme (CGS)? When do I use it? How does it work? What happens when the intended use of your building changes?
R & C Brief 15 (2020): Input VAT and non-owners
Revenue & Customs Brief 15 (2020): 'VAT; Conclusion of review of Import VAT deducted as input tax by non-owners', explains the outcome of HMRC's review.
R & C Brief 14 (2020): Opticians and sellers of hearing aids
Revenue & Customs Brief 14 (2020) changes to the methods used by opticians and sellers of hearing aids to account for VAT on their supplies.
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- CPD: Land & Property Update (September 2020)
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Missed last time's Web-update?
Nichola's SME Tax W-update 1 October 2020
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- Corporate Transparency and Register Reform: BEIS response
- COVID-19: Second report into economic impact of Coronavirus
- Mutual Agreement Procedure documents remain confidential
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SME Tax Monthly Summary September 2020
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