Later lifetime gift of shares
An investment company has issued 100 ordinary £1 shares divided into four equal lots (A, B, C, D) of 25 ordinary £1 shares. They all have equal rights for income and capital.
The shares are held by my clients, a married couple. The A and B shares are held by the husband, and the C and D shares by the wife. On the husband’s death, all his assets go to his wife under his will. On the wife’s later lifetime gift of the now rebased A and B shares to her adult children, can HMRC say that all the A, B, C and D shares are of the same class for CGT pooling purposes and therefore there is a part disposal of her original shares, despite the alphabetical designation of all the shares?
Query 20,599– Half and Half.
Which address to use for VAT registration purposes?
My query relates to an issue that increasingly affects businesses operating remotely. We act for a company client that is registered for PAYE, corporation tax and VAT. The business previously operated from a physical office but has restructured its operations so that all employees and directors now work remotely from home.
The registered office has been updated to a service provider’s address, which does not accommodate any trading activity.
HMRC has requested a trading address that is not just a registered office, which raises a question given the fully remote nature of the business.
We understand that HMRC requires a ‘principal place of business’ where day-to-day activities occur, and this cannot be just a mail-handling address. In light of this, the directors might use a co-working or open office space as the trading address but use would be periodic and flexible.
Would HMRC accept a co-working or flexible office space as the VAT trading address, provided some level of genuine business activity takes place there (even if intermittent)?
- What level of evidence or supporting documents would typically satisfy HMRC that such a space is being genuinely used for business purposes?
- Is there any formal guidance on how a remote or decentralised businesses can meet this requirement?
Readers’ thoughts about this and similar cases would be welcome.
Query 20,600– Gypsy Gail.
Double trouble
I act for a UK company owned equally by two shareholders, John and Emma. Both are UK resident but do not work for the company and are not directors. The company has recently transferred an asset to Emma that is worth £100,000; Emma paid nothing in return. I am reviewing the IHT position for both shareholders, but I am particularly concerned about John’s position.
My understanding of the IHT rules is as follows.
- You start by apportioning the company’s transfer of value between all the shareholders (IHTA 1984, s 94(1)) – ie a deemed chargeable transfer each of £50,000.
- You then take the value, which would normally be attributed to any single person under s 94(1), and disregard whatever part of ‘that value’ is chargeable to income tax for that person (s 94(2)(a)).
- John, who does not receive an asset (and therefore has no income tax to pay as he has not received a distribution), will have been deemed to have made a chargeable transfer of value. This makes sense to me as his estate has diminished as a result of a gratuitous transfer.
- Any earlier IHT transfers made by John are cumulated and tax is charged on the £50,000 IHT transfer accordingly.
Is this right? It seems correct, but it would mean that there was a double charge to tax as Emma would be taxed on the full £100,000 as a distribution and John would also be liable to IHT on £50,000.
So is the correct analysis that as there is an income tax charge on the entire value of the asset, there is nothing to apportion to the shareholders for IHT purposes? This would mean that no chargeable IHT transfer arises to John.
Any advice that readers can give would be much appreciated.
Query 20,601– Fair Share.
Failure to register
I’ve recently taken on a new client. He is the trustee of a family trust that was established in the early 2000s. The previous accountant prepared and submitted accounts and tax returns to HMRC every year and the trust’s tax affairs are up to date. However, it appears that the trust was never registered under the trust registration service. I have now taken steps to register the trust.
The maximum penalty for failing to register is £5,000. Given that HMRC is aware of the trust and that it has an unblemished compliance record, do readers think that HMRC will impose a penalty? Can my client or I do anything to mitigate any penalty if it is imposed?
Query 20,602– Trusting.
