Taxation logo taxation mission text

Since 1927 the leading authority on tax law, practice and administration

New queries: 11 July 2019

08 July 2019
Issue: 4703 / Categories: Forum & Feedback
Investment management; Art appreciation; Not so charitable!; Assessment

Investment management

Investment management and business property relief?

My client is a private limited company, which is registered in the UK and operates here. It carries on the business of investment management and does this by the creation of funds consisting of directly held non-UK equities. It actively manages these funds through open-ended investment companies (OEICs) and undertakings for collective investment in transferable securities (UCIT) OEICs. These OEICs comprise publicly traded equities of companies – in any industry, trading or investment – of a foreign country.

The funds are offered as investments to third parties and the company generates its fees from such offerings.

My question is whether the shares in my client company (not the shares in the OEICs) will be eligible for inheritance tax business property relief? On the other hand, will they be precluded by IHTA 1984, s 105(3) or will the exclusions in s 105(4) or s 105(4A) apply?

I should be grateful for advice from Taxation readers.

Query 19,399– Hereward

Art appreciation

Tax treatment of art collection held in trust.

We have been appointed to act on behalf of a client who is a UK resident non-domiciled individual. He became UK resident in 2013-14 and has therefore not become deemed domiciled.

He has a substantial art collection, some of which is located in his UK residential property and other items are abroad.

The art collection had been acquired before our client became a UK resident. It can be assumed that the current market value substantially exceeds the original cost.

Our client is considering moving the UK collection overseas and settling it into a non-resident discretionary trust together with the art pieces already located abroad. It is likely that the art pieces will be held by a non-resident company owned by the trust. Thereafter, the company may loan him some of the art pieces to be brought to the UK for his enjoyment.

He will remain a beneficiary of the trust for the next few years and expects to leave the UK before he becomes deemed domiciled.

I have the following questions on the tax issues arising:

  • If the non-resident trust is a ‘dry trust’ (in other words, if there is no relevant income), is there a benefit arising on our client for the enjoyment of the art collection?
  • If rent is to be paid for the enjoyment of the art collection, how would this be calculated? We understand art valuation is very subjective especially in the absence of a rental market. Would a payment of rent cancel out any benefit arising?
  • Will the loan by the company and/or the enjoyment of the art collection in the UK be treated as a remittance in any way?

I look forward to hearing from readers on these questions.

Query 19,400– Vinci.

Not so charitable!

Claiming tax credit on gift aid donation.

A client has pension income of some £6,000, interest of £1,000 and dividends of £13,000, plus a chargeable event of £1,000 with £200 notional tax. The client also makes net gift aid donations of £1,700, so needs to cover £425 of tax on the gift aid donations.

My software shows that, on the one hand, the notional tax credit on the chargeable event can reduce the tax due on the dividends but it is not used to reduce the tax liability caused by the gift aid donations.

Is the software correct? I thought the notional tax credit can be used to reduce a tax liability. I could not find this example in the exclusion list.

I would be grateful for any assistance from readers.

Query 19,401– Frustrated.


Flat rate category for window cleaner.

I act for a client who trades as a window cleaning business and he employs six staff. He is VAT registered and uses the flat rate scheme – his main rate is 12% for other business services, which produces a very favourable outcome each quarter.

However, the new limited cost trader rate of 16.5% introduced on 1 April 2017 has caused him some problems because he does not buy many goods but we have always been happy that the total purchases of goods have exceeded the 2% and £250 thresholds that need to be considered each quarter, so that he can still use the 12% rate.

However, an HMRC officer is now saying that we should not have included ladders and buckets in the figure for relevant goods because they are capital items. He also said that road fuel for the business vans should be excluded because there might be some private use.

The end result is that HMRC has raised an assessment for £3,000 which seems unfair because my client has always used the profit he makes with the scheme to help pay for his sick daughter’s medical care. In my opinion, goods are goods and they should all be included in the calculations.

I am annoyed with the officer’s inflexibility, but would appreciate Taxation readers’ thoughts.

Query 19,402– Victor Meldrew.

Issue: 4703 / Categories: Forum & Feedback
back to top icon