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New queries: 29 July 2021

27 July 2021
Issue: 4802 / Categories: Forum & Feedback

A new venture

Setting up a new firm and finding clients.

For the past two years I have been carrying out some tax consultancy work for a local firm of accountants dealing with compliance and planning for some of their clients and invoice for that work on an hourly basis.

I am self-employed and have my own professional indemnity insurance. I also have a few of my own clients and occasionally carry out one-off assignments for other firms.

Since working for this firm, I have got to know one of the accountants who prepares the clients’ business accounts. The two of us have been thinking about setting up our own practice and we have identified some suitable premises and have drawn up a business plan and cashflow forecast.

My concern is where we stand professionally with regards to the clients of this firm. I would not want to acquire a bad reputation for poaching clients, but naturally we have both built up a strong professional relationship with some of them.

Can readers provide some general advice on the approach we should take if any of those clients contact us with a view to transferring their business to us? As well as the reputation angle, neither of us would want to be on the receiving end of any legal action.

Query 19,795 – Newbie.

Trust nightmare

Inheritance tax due on excluded property trust.

In February 2010, my client bought into an established excluded property trust, situated in the Isle of Man, to mitigate his liability to UK inheritance tax. The assets of the trust were held as cash in an Isle of Man bank account. He died in September 2010, and since 2017 we have been in dispute with HMRC about whether inheritance tax is due on the sum involved.

My case is very similar to that of Salinger (TC5407) (, which was won by the taxpayer. I believe that HMRC appealed but the appeal was not heard because the Salinger family conceded rather than face further legal costs if HMRC ultimately won.

HMRC has issued notices of determination in our case and, we understand, in other cases as well. Those determinations are under appeal. HMRC’s statement of case centres on whether transfers of value were made when my client bought into the trust. The case is therefore likely to turn on valuation evidence.

Are readers aware of HMRC’s position in other cases involving the same structure? Are there any other grounds other than valuation on which HMRC can be challenged? Is anybody acting for clients who are also involved in litigation this issue?

Any information or guidance would be very gratefully received.

Query 19,796 – Concerned.

Construction industry scheme

CIS registration for NewCo converting a hotel.

My client and his wife are property investors, using companies to buy residential property with their own capital and bank finance and letting them to unconnected parties on a long term basis.

For commercial reasons and preferences of lenders, the couple have ended up with three companies, all of which undertake this activity, with two to three properties owned by each company.

A NewCo has now been set up by the couple for the acquisition of a small hotel to be converted into a number of residential apartments. Cost of £1m are anticipated for the demolition and conversion of the building.

I am now considering NewCo’s position as far as CIS registration is concerned. I am wondering whether the other entities owned by the couple which are, in my view, clearly property investments, are relevant to the odd project where they will be doing some work prior to letting the flats and whether they are investors or developers is a consideration in the context of CIS.

Readers’ thoughts would be helpful.

Query 19,797 – Imperial.

VAT rebate on letting

VAT on long-term accommodation.

One of my clients is VAT registered and she owns a holiday apartment which she rents out on Airbnb.

For one letting, a customer stayed for 84-nights (without a break) because he was working in the area. My client has charged 5% VAT on the whole booking but the guest is asking for a VAT rebate under the 28-day regular lettings rule.

Could readers explain how this works? If some of the fee is exempt from VAT, will my client need to do a partial exemption adjustment?

The other complication was that the booking was in the name of the customer’s limited company, although he was the only guest staying there. Does this make a difference?

Query 19,798 – Vacation Val.

Issue: 4802 / Categories: Forum & Feedback
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