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New queries: 19 December 2019

16 December 2019
Issue: 4725 / Categories: Forum & Feedback
Home again; Post retirement; Loan nightmare; Social club 

Home again 

Sale of overseas property by former non-resident.

My client and her former husband moved from the UK to France in 1985, at which time they sold their only UK property and ceased to be UK tax resident.

In 2000, they jointly acquired an investment property in France with a sitting tenant. The couple divorced in 2005 and the investment property was transferred to my client as part of the divorce settlement.

In 2006, she moved permanently to the UK. In 2019, the sitting tenant died. My client has now exchanged contracts to sell the property with a completion date of January 2020. At no point has my client lived in the property, so there would appear to be no entitlement to the only or main residence exemption.

We have engaged French tax advisers in relation to the French tax payable, most or all of which will be available for double tax relief.

My question relates to the base cost to be used in the UK capital gains tax calculation. Will this be:

a) the original purchase cost of the property in 2000;

b) the 2005 valuation used for the purposes of the divorce;

c) a 50/50 combination of (a) and (b);

d) the value in 2006 when she became UK tax resident; or

e) something else?

Instinctively I favour (d) because overseas gains made while non-resident ought not be taxed in the UK. If (d) is the 

right answer, how do we now establish the value in 2006? Would it be acceptable to HMRC to calculate the gain based on the 2005 valuation and then pro-rate the gain for the relevant time period?

I would be grateful for any assistance from Taxation readers.

Query 19,487– Humph.


Post retirement 

Foreign pay and investments for returning UK citizen.

My client is UK domiciled but has been working abroad for a number of years as a senior employee in a large company. Now approaching retirement, he is planning to return to the UK and has asked for advice on two related points.

First, he is to receive a ‘leaving allowance’ from his employer after he has ceased employment, likely to be in excess of $100,000. This will be entirely attributable to his non-UK employment carried out abroad. Am I right in saying that as long as he returns to the UK after the cessation of employment the allowance will not be taxable here? Or should he not return to the UK until the start of the tax year after that in which the allowance is actually paid to him?

Second, he is considering investing in a ‘company sponsored international savings plan’ with a reputable financial institution. The rules of this plan will not allow him to make contributions when he returns to the UK. It seems to me that from a UK tax point of view it is inefficient, in that he won’t get any tax relief for contributions he makes (or the employer makes on his behalf), yet payments out of the fund could be taxable as pension income. Have I understood this correctly?

Query 19,488– Cautious.


Loan nightmare 

Potential sell-off of employee benefit trust loans.

I act for several  clients who have used various employee benefit trust/contractor loan schemes promoted by third parties. These have not been settled and the clients are awaiting the outcome of the loan charge review before deciding what to do next. 

I am hearing anecdotally that some trustees are contemplating seeking repayment of the loans or even selling off their loan books to third parties at a heavily discounted value. Those third parties will presumably then seek repayment of the loans. 

What concerns me is that some clients could be left in the nightmare position in which they have to repay the entirety of the loans and also pay tax under the loan charge if it is upheld by the review. 

If the loan is repaid, the trustees would presumably be under no obligation to distribute funds back to my clients. And, if the loan book has been sold off, my clients would, I assume, have no further right to the money. 

Am I right to be worried about this potential ‘double whammy’ and, if so, is there anything I can advise my clients to do now to avoid the problem? Even if we accept HMRC’s premise that these loan arrangements are tax avoidance schemes, it does seem unfair that clients can be taxed on the amount of the loan outstanding on 5 April even if they subsequently repay the loan and never see a penny of the money again.

Can readers advise?

Query 19,489– Lonely Adviser.


Social club 

Sports hire VAT dilemma.

I act as treasurer for my local village cricket club, which is VAT registered because it is operated by a successful bar and social committee. 

Part of the facility includes a five-a-side football pitch, which we hire out to local teams and firms – the pitch has floodlights so it has become very popular in the evenings. 

My questions concern VAT. 

  • Are the pitch fees we charge exempt from VAT or, as one member thinks, only if a hirer agrees to pay for a 
  • 12-week let with a booking at least once every two weeks? 
  • Does it make a difference if we hire the pitch to a local club or, as sometimes happens, a commercial business for a corporate event? 
  • Is a separate charge of £25 if the hirer wants to use the club’s changing rooms subject to VAT?  

Readers’ thoughts are welcome. 

Query 19,490– Boycott Root.
Issue: 4725 / Categories: Forum & Feedback
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