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Applying allowance on CGT.
I have a client who was gifted a property by his mother in 1996. He subsequently transferred a half share to his wife in April 2007.
They have only recently sold it. In ‘Joint calculation’, Taxation, 18 January 2011 (tinyurl.com/yusunvru) one of the Readers’ forum replies to a similar situation suggested that the wife would be entitled to indexation allowance from 1996 to April 2007 to be added to her acquisition value and used against capital gains tax for the current transaction.
Do readers think that this is a fair interpretation of the application of the rules and would her husband also be so entitled?
Query 19,995 – Rupert.
Offsetting platform fees against investment income.
Having recently participated in a CPD course, the lecturer covered the increasingly common topic of peer-to-peer lending (P2P).
Online platforms offering P2P lending typically operate by the investor depositing a lump sum into the platform, which is then lent to individual or business borrowers. Monthly repayments are then made by the borrowers to the platform and the net amount (being a mixture of capital and interest less a percentage-based fee charged by the platform) is available for investors to withdraw.
An interesting point which caught my attention was that relief is available to investors/lenders on the P2P platform’s fees, by way of deducting these from interest due to the lender.
I therefore wonder whether relief is available on the same basis for similar cases we come across regularly – such as fixed or percentage-based fees payable to a platform (eg bank or equity house) through which an individual acquires shares which then generate dividend income.
Another relevant case we have been involved with concerned clients paying an introduction fee to join a structure through which they and a group of other individuals lend money on a commercial basis to an unconnected property development venture.
Could Taxation readers share their thoughts on the possibility of offsetting the platform/introduction fees against the investment income generated thereby?
Query 19,996 – Primat.
Tax savings on disposal of UK residential property.
We have a client who is living abroad for work purposes and is, therefore, treated as non-resident. His wife, on the other hand, is in the UK and she is treated as a UK tax resident.
We are of the view that they are not permanently separated as the husband intends to return to the UK once his two-year contract has passed.
They have a house which used to be their main residence but has been let for a number of years and is about to be sold.
Based on the ‘normal’ capital gains tax rules, the wife’s share of the gain is £53,678, after deducting only or main residence relief. On a ‘time apportioned method’ the husband’s capital gain is £34,220.
Is there any way that the wife could transfer her 50% share of the property to the husband so that the entire gain is taxed on the ‘time apportioned method’?
Reading the legislation we suspect the answer is ‘no’ as presumably the husband would be deemed to have acquired the wife’s 50% share of the property on the day of transfer, which is now, and no ‘time appointment’ will apply?
What are readers’ thoughts?
Query 19,997 –Perplexed.
Services to associated business – any VAT to charge?
I act for a VAT-registered property letting agency, which wholly deals in the buy-to-let market.
The company employs five staff and manages about 300 properties on behalf of residential landlords. There is one single shareholder and director.
The same woman is also the sole director and shareholder of a separate company, which owns five buy-to-let residential properties. It is not VAT-registered because all income is exempt from VAT.
The properties are managed by the first company but no charge for services is ever made by the agency to the second company.
Is this correct? If there is an output tax liability, how would this be calculated as there are no time-sheets kept – the staff just do the job, so to speak, providing a free supply of services.
Secondly, do readers think that there is any advantage in my client forming a VAT group? She could do this as she is the sole shareholder in both companies. However, I cannot see any commercial or monetary advantages of going down this route.
Readers’ thoughts would be very much appreciated.
Query 19,998 – Property Pat.
