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New queries: 15 July 2021

13 July 2021
Issue: 4800 / Categories: Forum & Feedback

Estate planning

Do parents’ mirror wills need revising?

I have been reviewing capital taxes for a family business. The 80-year old parents are in partnership with their 50-year old son. Their daughter, who is of a similar age, is not involved in the partnership.

The parents’ wills leave their respective share of the partnership to the son. They own their main residence as tenants in common, and each will leaves their respective equal share of the main residence to the children, with a life interest for the surviving spouse. Other assets are to be transferred to the surviving spouse.

The situation with the main residence seems to be a fairly common nil rate band trust device which was popular a decade or two ago. To a large degree the transferrable nil rate band renders this an unnecessary complication now.

However, with the reforms in recent years to trust taxation, an area with which I am not completely familiar, I wonder if the life interest now causes unintended difficulties, and whether advice to clients with this older style mirror will and nil rate band trust should be to have their wills refreshed?

I look forward to readers’ thoughts.

Query 19,787 – IslandTaxLady.

BADR revisited

Business asset disposal relief for petrol station.

My client traded as a petrol station by way of a limited company for more than 15 years. In February 2018, the company entered into a lease agreement, an option agreement and an operator’s agreement with a third party limited company.

The lease was for two years at a fixed rental plus VAT, the operator agreement was to run the business for a nominal £1 plus VAT, and the option agreement to buy the site at an agreed price, either in the first or second year.

In July 2019 the operator exercised the option and the site was sold. At the time, there was also an ongoing VAT tribunal case regarding car wash rental. The tribunal case was heard and finalised in February 2021.

Would the company qualify for business asset disposal relief if it was now liquidated and funds distributed by the liquidator or would HMRC challenge on the basis that the business ceased trading in February 2018 when the lease, option and operators’ agreement were signed more than three years ago?

Finally, do readers think that the tribunal case will have any bearing on this matter?

Query 19,788 – Uncertain.

Repayment claim

Claiming back high income child benefit charge.

Like many other practitioners I read the report of the Wilkes case (CRC v Jason Wilkes [2021] UKUT 150 (TCC)) with great interest. That was the decision of the Upper Tribunal that a discovery assessment cannot be used to assess tax unpaid as a result of non-declaration of the high income child benefit charge, on the basis that discovery assessments only cover non-declared income and do not extend to underpaid tax.

I have a few clients who received discovery assessments in the same circumstances as Mr Wilkes and who paid the tax rather than fight HMRC. What should I be advising them?

Is it possible to put in a claim for repayment of the tax under the overpayment relief rules in TMA 1970, Sch 1AB or would that be prevented because of the prevailing practice restriction?

Are there any other routes open to clients or do we have to wait to see what HMRC might come up with? I suspect that HMRC might appeal and if it does then I would expect nothing to happen until an appeal is heard, but I do not want to risk being out of time for any claim which could be made.

I look forward to receiving readers’ views on this matter.

Query 19,789 – Optimist.

Place of supply

Training services and place of supply.

I have a VAT registered client who provides cyber-security training, mainly to government departments and other non-corporate entities.

For one contract with the Foreign, Commonwealth and Development Office (FCDO), he and two staff will travel to Belgium to deliver courses for staff at a Belgian government department. As the work is being carried out in Belgium, does he need to register for VAT in that country and charge Belgian VAT on his invoice(s) to the FCDO?

He has another contract for a big church in Ireland, working directly for the church but this training will be performed online, with my client delivering face-to-face training but with the church staff being in Dublin and my client at his office in London. What is the VAT position here?

Finally, if my client uses UK-based subcontractors to help with the Belgian project, and they are VAT registered, will they charge my client VAT and, if so, can he claim input tax?

Readers’ thoughts would be appreciated.

Query 19,790 – Security Steve.

Issue: 4800 / Categories: Forum & Feedback
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