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New Queries: 21 January 2021

19 January 2021
Issue: 4776 / Categories: Forum & Feedback

Capital gains

Capital gains tax on selling golf club land.

I have a client who is a golf club. It is a basic members club and not a limited company or a community amateur sports club.

It is registered for corporation tax, has a unique taxpayer reference number and pays corporation tax on profits from non-members and bank interest.

A developer wants to buy all the land and the board are keen to sell. They will then dissolve the club after distributing the net proceeds among the members.

As far as I understand the trustees/board are liable to report the capital gain on the difference between the March 1982 value and sale price allowing for indexation to December 2017, fees and enhancement expenditure in the normal way.

One of the members who is an accountant says that is wrong and that each of the members is, in effect, selling part of the land (the club holds it as bare trustee) and the proceeds should be divided between all the members and each claim their annual capital gains tax exemption. This would result in a much lower capital gains tax bill overall.

I do not think this is correct but what do readers think? Also, could I have assistance in locating the legislative reference that brings clubs and associations into the charge for corporate tax as I am not able to find it? Lastly, is this something we could seek HMRC clearance on?

I look forward to receiving replies.

Query 19,691 – Puzzled.

French-based accountant

VAT on services provided outside UK.

My understanding is that under VATA 1992, Sch 4a para 16 business-to-consumer services of professional services take place where the customer is based, rather than where the supplier is based. However, paragraph 16 goes on to say ‘other than any services relating to land’.

So what is the situation where a UK accountant is preparing the UK tax return for a client who is resident in France and where the only item on the UK return is income from the rental of property in the UK? Alternatively, what would be the situation if the UK accountant was completing the UK capital gains tax land disposal report following the sale of a UK property?

I look forward to receiving assistance from Taxation readers.

Query 19,692 – Confused.

Split year treatment

Self-assessment return for class 4 National Insurance.

My client is an American citizen who arrived in the UK in September 2019. Therefore I am expecting him to be considered UK resident under the statutory residence test for 2020, albeit entitled to claim split year treatment.

He was self-employed in the US and has continued to work on a self-employed basis following his arrival in the UK. We are now considering whether a 2020 UK self-assessment tax return is required.

His profits of around £25,000 are subject to US tax which we have calculated covers any UK tax that may arise. However, the question of National Insurance vexes me. I can see that class 2 does not apply for the first 26 weeks after arrival, but I cannot ascertain whether class 4 applies. A class 4 liability will necessitate a return for 2020, and I do not believe that US social security contributions would reduce that liability.

However, my client was obliged to pay two years of National Insurance contributions to access the NHS services, so does this override any obligation to report class 4 to HMRC?

I hope Taxation readers can help me with this problem.

Query 19,693 – Transatlantic.

VAT penalty

Is a big VAT penalty justified for changing return dates?

I act for a client who did a stupid thing which HMRC has found out about and issued a 35% penalty for deliberate not concealed behaviour.

My client is a service business and raises all sales invoices on the last day of each month. He has encountered cash flow problems because of coronavirus and decided to alter the parameter dates for his VAT returns by one day for his June and September 2020 returns.

In other words, the June VAT return only declared invoices up to 29 June, missing out all of his June invoices, which were therefore declared on the September return, which he also adjusted to include 30 June sales but exclude 30 September.

Bad luck meant that both periods, when corrected, had underpaid VAT of £12,000 and £8,000 respectively, and the officer has assessed this tax plus the penalty.

This seems harsh because there is no underpaid VAT, only delayed VAT. The officer said that a lower penalty would only have applied if errors were self-correcting in the following period.

The irony is that my client is eligible to use the cash accounting scheme, which would have produced the cash flow benefit he wanted. Can we ask the HMRC officer to allow a retrospective joining date of 1 April 2020 to solve the problem?

Readers’ thoughts would be welcome.

Query 19,694 – Juggler.

Issue: 4776 / Categories: Forum & Feedback
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