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13 December 2000
In the spirit of the hour?
My client has a profitable trading company which he wholly owns. He has acquired property personally, which he lets out. He financed this with a buy-to-let mortgage which he may not repay for five years, but the funds in a deposit account with the lender are offset when calculating the interest due. He is permitted to draw on or add to the deposit account monies at his discretion.
My client has a profitable trading company which he wholly owns. He has acquired property personally, which he lets out. He financed this with a buy-to-let mortgage which he may not repay for five years, but the funds in a deposit account with the lender are offset when calculating the interest due. He is permitted to draw on or add to the deposit account monies at his discretion.
In the spirit of the hour?
My client has a profitable trading company which he wholly owns. He has acquired property personally, which he lets out. He financed this with a buy-to-let mortgage which he may not repay for five years, but the funds in a deposit account with the lender are offset when calculating the interest due. He is permitted to draw on or add to the deposit account monies at his discretion.
If he borrows from his company, paying interest at the Inland Revenue official rate of interest, and puts the money borrowed into the deposit account with the mortgage lender, would the interest paid to the company be a deductible expense in his property letting business?
If he repays the loan from the company within nine months of the company's year-end, would there be no section 419, Taxes Act 1988 tax (or interest thereon) even if he borrows a similar sum again from the company shortly after the nine months?
(Query T15,736) – Backwoodsman.
Residence principle?
A client, employed in the building industry, some years ago (when newly married) purchased a run-down property. The property was initially to live in, but he also carried out improvements and then sold to move into a superior property. During a period of five years he moved house three times before he found his 'dream house'. He lived in all the previous properties with his wife whilst they both carried out the improvements. They lived in the final property for over four years.
The Inspector of Taxes is of the opinion that the earlier purchases/sales were 'an adventure in the nature of trade'. Our client argues that he was doing exactly the same as many other couples do, i.e. improving their life style. Readers' observations would be appreciated.
(Query T15,737)– Bob the Builder.
Ignored authorisation
A client recently authorised a corporation tax repayment to be issued to us in settlement of an outstanding invoice. Despite writing and telephoning the Inspector several times to ensure we received the repayment, it was sent direct to the client.
As this is not the first time it has happened, we wonder what we can do. The Inland Revenue basically says that the Taxpayer's Charter does not extend to the agent. Is there any redress? (Query T15,738) – David.
Lost in a pool
I am unclear how the taper relief provisions and the identification rules operate when a disposal of shares is matched with a holding of shares at 6 April 1998.
The problem arises following a sale of shares in December 2000. This sale has been partly matched with a post 6 April 1998 purchase (X) on a last in first out basis. This purchase (X) has been eliminated so the remainder of the cost (Y) has been allocated from the holding at 6 April 1998. It would appear that the capital gains tax arising on the sale of the proportion of the shares allocated to the holding at 6 April 1998 (Y) may be eligible for a 5 per cent discount if they were held before 17 March 1998.
As the pooling system treats shares as a single asset, how is one to determine if the asset was held on 17 March 1998? Does it matter if there were purchases made between this date and 5 April 1998 and how are sales in that period treated for this purpose?
Also, if purchases between 17 March 1998 and 5 April 1998 are relevant, how is the date of a share purchase acquired under a save-as-you-earn contract determined? The form exercising the option to acquire the shares was signed on 13 March 1998 and the shareholder was on the register of members on 19 March 1998 according to the dividend voucher.
I appreciate that, if the pooled holding at 6 April 1998 is deemed to have been acquired at that date, taper relief would not be available in the circumstances described above. However, clarification would be appreciated.
(Query T15,739) – Pinfold.
My client has a profitable trading company which he wholly owns. He has acquired property personally, which he lets out. He financed this with a buy-to-let mortgage which he may not repay for five years, but the funds in a deposit account with the lender are offset when calculating the interest due. He is permitted to draw on or add to the deposit account monies at his discretion.
If he borrows from his company, paying interest at the Inland Revenue official rate of interest, and puts the money borrowed into the deposit account with the mortgage lender, would the interest paid to the company be a deductible expense in his property letting business?
If he repays the loan from the company within nine months of the company's year-end, would there be no section 419, Taxes Act 1988 tax (or interest thereon) even if he borrows a similar sum again from the company shortly after the nine months?
(Query T15,736) – Backwoodsman.
Residence principle?
A client, employed in the building industry, some years ago (when newly married) purchased a run-down property. The property was initially to live in, but he also carried out improvements and then sold to move into a superior property. During a period of five years he moved house three times before he found his 'dream house'. He lived in all the previous properties with his wife whilst they both carried out the improvements. They lived in the final property for over four years.
The Inspector of Taxes is of the opinion that the earlier purchases/sales were 'an adventure in the nature of trade'. Our client argues that he was doing exactly the same as many other couples do, i.e. improving their life style. Readers' observations would be appreciated.
(Query T15,737)– Bob the Builder.
Ignored authorisation
A client recently authorised a corporation tax repayment to be issued to us in settlement of an outstanding invoice. Despite writing and telephoning the Inspector several times to ensure we received the repayment, it was sent direct to the client.
As this is not the first time it has happened, we wonder what we can do. The Inland Revenue basically says that the Taxpayer's Charter does not extend to the agent. Is there any redress? (Query T15,738) – David.
Lost in a pool
I am unclear how the taper relief provisions and the identification rules operate when a disposal of shares is matched with a holding of shares at 6 April 1998.
The problem arises following a sale of shares in December 2000. This sale has been partly matched with a post 6 April 1998 purchase (X) on a last in first out basis. This purchase (X) has been eliminated so the remainder of the cost (Y) has been allocated from the holding at 6 April 1998. It would appear that the capital gains tax arising on the sale of the proportion of the shares allocated to the holding at 6 April 1998 (Y) may be eligible for a 5 per cent discount if they were held before 17 March 1998.
As the pooling system treats shares as a single asset, how is one to determine if the asset was held on 17 March 1998? Does it matter if there were purchases made between this date and 5 April 1998 and how are sales in that period treated for this purpose?
Also, if purchases between 17 March 1998 and 5 April 1998 are relevant, how is the date of a share purchase acquired under a save-as-you-earn contract determined? The form exercising the option to acquire the shares was signed on 13 March 1998 and the shareholder was on the register of members on 19 March 1998 according to the dividend voucher.
I appreciate that, if the pooled holding at 6 April 1998 is deemed to have been acquired at that date, taper relief would not be available in the circumstances described above. However, clarification would be appreciated.
(Query T15,739) – Pinfold.
