Is speaker fee at company event classed as entertaining?
A client is planning to hold a big event to celebrate a successful year’s trading and will be arranging a night of free food and drink for all staff and a ‘plus 1’ guest at a local hotel. They have also arranged for a national TV celebrity to attend the evening and they are paying her a fee of £4,000 plus VAT for her time. They have also agreed to pay one night’s accommodation for the guest at the hotel, which will cost £200 plus VAT, and the hotel will invoice my client’s business directly.
I understand that my client can only claim 50% input tax on the food and drink bill because the food and drink for the ‘plus 1’ spouses, partners and friends will be classed as business entertainment, but what about the two other expenses? A colleague has suggested that they can fully claim input tax because the speaker attendance is linked to a ‘reward for our staff’ rather than an intention to ‘entertain the spouses of our staff’. Apparently, the recent decision in the case of Littlewoods Ltd [2017] STC 2413 about input tax attribution supports this argument. What do readers think?
Query 20,667– Entertainer.
All that glitters
One of my clients has come up with a problem I have never seen before. His father died three years ago, leaving everything to my client. The estate was fairly modest but included a painting by LS Lowry. Family tradition was that Lowry gave the painting to my client’s great grandfather in the 1930s as payment for some building work he did for him. On my client’s father’s death, the painting was professionally valued at £750,000 and inheritance tax was paid on that value. A few months ago, my client was approached to lend the painting for an exhibition and was horrified to be told that the painting was not an original Lowry but a worthless copy. That verdict has been confirmed by two further experts.
My client has asked if there is any way in which the inheritance tax originally paid in respect of the painting can be reclaimed. To my mind this is not a question of the value falling after death: the painting was never worth anything in the first place. Is there anything that can be done?
Query 20,668– Art lover.
Change of plan
My client and his wife (their adult children have all left home) live in job-related accommodation. Some years ago, they purchased a property that they were intending to live in once they retired. Currently it is rented out on a commercial basis to a third party. They have, however, now found their ‘dream home’, which they intend to retire to instead, and they will fund this in part by the sale of their existing rental property. I have always advised them that the rental property will qualify as their principal private residence, even though they are not living it. But that was on the basis that they would move into it in retirement. I think that they should still qualify, on the basis that it was their intention to live in it, but they have asked me how they can prove that intention if HMRC raises the issue. What evidence would HMRC look for, and what can be done now before the sale to demonstrate their intention?
Query 20,669– Pickford.
Which limit applies?
My son has asked me a tax question that I can’t answer – my experience is dealing with corporates, so this is not my area of expertise. He has a full-time job under PAYE but has started to earn money at weekends as a musician in a band. To start with, this was only a few hundred pounds a year, but the amount is increasing. He tells me that in the current tax year he is likely to receive about £2,000 from this activity. Expenses are minimal. This is over the £1,000 trading allowance but less than the recently announced £3,000 notification threshold. As a PAYE taxpayer, he has never been within self assessment. What are his obligations here? The fact that there are two separate limits, £1,000 and £3,000, seems confusing. Surely a lot of people are in this position. What is the correct procedure?
Query 20,670– Dad.
Queries and replies
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