Is this a spartan form of entertainment?
My client company operates a chain of half a dozen retail shops. In pre-Covid days it would often have meetings with its key suppliers and advisers – such as its property consultants or employment lawyers – in its head office premises. At these meetings modest refreshments, coffee and sandwiches etc, would be provided – the classic working lunch.
Since Covid, working patterns have changed and people (employees and suppliers) are more reluctant to come into the office; such meetings now tend to take place in local restaurants or coffee shops. Nothing else has changed and these are still working meetings. However, it has been suggested that the expenditure on non-employee meals should now be categorised as entertainment and disallowed for corporation tax purposes. Is this right? The purpose of the expenditure has not changed. Or is it the case that the expenditure on non-employees was always disallowable and hence that the client has underpaid tax?
This is not entertaining in any real sense – it is not like people are being taken out for a day at the races.
Query 20,659– Sandwich Man.
Dutch rental income and UK tax
Can other readers help resolve a query in the office about whether one can claim credit for Dutch income tax paid against UK tax due on rental income received on property in the Netherlands?
In the Netherlands, we understand, if a person holds a property as an investment, there is a deemed value ascribed to the property, and tax is payable on a deemed return on that value. This is payable, we understand, whether they receive rental income or not.
The only time it is possible to claim to be taxed on actual rental income is when there is a deemed fall in value, when the person can, exceptionally, elect to be taxed on the actual income with no allowance for expenses except interest on improvements.
We understand that HMRC takes a pragmatic view with regard to allowing credit for foreign tax paid, but is this a bridge too far? Does anyone have practical experience of the HMRC attitude to this, one way or the other?
Query 20,660– Langclegg.
Alphabetti …
I’ve recently taken over a client that has four unrelated 25% shareholders. It has a conventional alphabet share structure with A, B, C, D shares. The directors take a small salary (to which PAYE is applied) and then extract funds via directors’ loans. The company’s year is 31 December. The previous adviser typically did the accounting work each May and posted dividends to clear each director’s loan account.
Dividend rates go up 6 April 2026 and so the directors have suggested that the books are written up early to bring the payment date of the dividend to 31 March.
This would mean that two dividends would be taxable in 2025-26.
Three of the directors are already in the higher rate band but the second dividend would still be within that band, so there is an overall saving.
For one director, however, the second dividend would take them into the additional rate band for 2025-26, and so he doesn’t want to bring the dividend date forward.
Is this possible – can dividends be paid on different dates and would it mean that when I write the books up in March, I would only clear three of the loan accounts?
I appreciate that this is largely a company law point but any advice that readers can give would be most welcome.
Query 20,661– Spaghetti.
Easing the burden of university living
I act for a couple of family companies where the children of the husband and wife shareholders will be going to university next year.
They have asked me about creating a new class of share with dividend rights, which they will then gift to their children. Dividends will be paid on those shares to the children to fund their living expenses while away.
I know that where the children are minors this is not effective (spotlight 62) but as the children will be over 18 years of age, is there still a problem?
Would it be better for the children to subscribe (if only a nominal amount) for the shares rather than them being gifted?
How vulnerable is such an arrangement to attack by HMRC?
Query 20,662– Worrier.
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