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New queries, issue 4310

28 June 2011
Entitlement to IHT active service exemption; VAT on training courses; MPs’ late-night taxis; sale of US property while owners in mid-travel.

Active service

One of my clients is in a sad situation. He served in the merchant navy and is dying of cancer as a result of asbestos poisoning while in the service, albeit many years ago.

My question is whether there may be an entitlement to the active service exemption from inheritance tax under IHTA 1984, s 154 for his estate on his death.

I was wondering whether the decision in Barty-King v Ministry of Defence [1979] STC 218 might be of assistance in such a case? Can Taxation readers offer advice on the relevant circumstances that must be satisfied for relief to be granted, and what evidence should be obtained, from whom, and at what stage?

I look forward to readers’ replies.

Query 17,828  – Red Ensign.

Selling yourself

I have a client who is a member of a limited liability partnership (LLP). The activity of the partnership is to provide coaching and training courses in marketing and advertising skills, not just in relation to a business selling goods and services, but also, for example, school or university leavers on how to sell themselves to get a job.

All of the courses are provided by a member of the LLP (rather than employees) and all are one-off events, in groups of ten to 12 students, where each delegate pays £50 for the right to attend.

My questions are as follows.

  • Does the nature of the courses mean that they qualify as ‘private tuition’ in accordance with the VAT legislation, i.e. as a subject ordinarily taught in a school or university?
  • If so, I understand that a VAT exemption applies to the income if the courses are given by a sole trader or member of a partnership, but are standard rated if given by a director of his own limited company. But is an LLP classed as a partnership or limited company arrangement as far as the legislation is concerned?

The turnover of the business is approaching the annual VAT registration limit of £73,000 so the decision as to whether the income is exempt or taxable now becomes very important. The members do not want to register if it can be avoided, because the students are not VAT registered and the LLP does not have very much input tax to claim.

Readers’ views are invited.

Query 17,829 – Teacher.

Late-night taxis

The Independent Parliamentary Standards Authority’s expenses scheme and guidance for MPs states that:

‘where the House of Commons sits late or when MPs undertake their parliamentary functions in the House of Commons until late at night, MPs may use their discretion in claiming for reimbursement of taxi fares for journeys from the House of Commons to a London area residence, or for the cost of an overnight stay in a hotel. Taxis will be subject to an upper limit of £80 for each such journey. Hotels will be subject to an upper limit of £150 per night.’

ITEPA 2003, s 293A(1)(a) provides that ‘no liability to income tax arises in respect of a payment made to a member of the House of Commons ... in respect of UK travel expenses’.

The relief for MPs’ late-night taxi expenses does not include any restrictions as to the number of journeys and no requirements as to irregularity or working after 9pm. The current rules for income tax relief therefore appear to be considerably more generous for MPs than for the individuals they represent.
It seems odd that it is considered appropriate to abolish the less generous relief for the rest of the population but maintain the more generous relief for MPs.

Have I missed anything?

Query 17,830 – Curious.

Sink or swim?

Having read the answers to the query ‘Lost property’ (Taxation, 9 June 2011, page 23), a thought that seems too good to be true occurred to me.

If the sale (i.e. the exchange of a non-conditional contract) of the property in question – the house in the USA – took place on board, say, a liner bringing the vendors from the USA back to the UK, would they be regarded as not resident in either country with the gain therefore not liable to capital gains tax in either country?

I would be very interested in hearing Taxation readers’ views on this point. If there is a possible planning point here, could it be used in any other situations?

Query 17,831 – Titanic.

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