VAT problem for split house sale and building work contract?
I have a limited company client that trades as a housebuilder. The company is building a substantial 13-bedroom property on the south coast, on land that it owns, which is not yet completed but is provisionally up for sale for £12m. The directors have received an offer for this sum, but the buyers want to buy the unfinished site for £9m and then engage my client for a separate build contract for £3m to finish off the building.
My client’s solicitors have agreed that the £9m/£3m split is reasonable for the purposes of stamp duty land tax, but would the separate building contract be subject to VAT at 20%, which would be non-claimable for the buyer? I think the buyer is looking at £3m being the price they would pay to my client, so any VAT would eat into what my client would receive (£2.5m rather than £3m).
Can readers confirm what the situation is here?
Query 20,759– Brighton Belle.
Validity of dividend waivers for tax planning
My client, a limited company with shares held 50/50 between husband and wife, is looking to its regular annual dividend. However, the husband has started receiving substantial pension income and as a result is a higher rate taxpayer. The wife currently has no other income, other than dividends from the company. It has been suggested to me that the husband could waive his right to the dividend to make use of the wife’s basic rate tax band, but I’m concerned about how robust this is.
After some reading, I’m of the opinion that the waiver is likely to be caught by the settlement legislation. I find this surprising, as it appears that dividend waivers are a common tax planning tool. My questions to readers are:
- Am I right in my thinking that dividend waivers are a common tax planning tool?
- Are they effective or are they caught by settlement legislation?
- If they are indeed common and caught by settlement legislation, it seems to be an easy target for HMRC, so why don’t we see these challenged more?
Thanks in advance for readers’ thoughts on this.
Query 20,760– Concerned.
Sleepless nights
I book many hotels in the course of my company’s business and usually book online directly with the hotel and pay up front. Normally the rate is non-refundable. Whenever I do so and ask for a VAT receipt, I am told that they are only issued when requested on check out. Surely the payment creates a tax point for the future service the hotel will provide to me and they should be accounting for output VAT at that time. Therefore, if I ask for a VAT invoice, they must provide me with one – or am I missing something?
Query 20,761 – Apprentice Gardener.
Cuánto cuesta?
I have two clients who are tax resident in Spain and are taxed there under the ‘Beckham rule’. In addition to ordinary employment income, they each also have substantial UK personal pension pots that they are considering drawing down on. The double tax treaty is clear that such pension income is not taxable in the UK. What is not clear is if the UK pension is taxable in Spain, and if so how. One client has been advised that such income does not fall within the Beckham rule and is therefore tax free in Spain, and the other has been advised that pension income is treated as part of the ‘Gross income from employment’ under article 17 of the Spanish tax code, and is therefore subject to the flat rate tax charge.
I have put this through two very high-level artificial intelligence systems and also received opposing answers; it would be useful to hear from someone with real-world experience of this point.
Query 20,762– Spanish Puzzle.
Queries and replies
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