Using late husband’s nil rate band.
My client’s husband passed away in Kenya in 1973. All his assets went to his widow then. They were living there, having never been to the UK before.
The widow later moved to the UK. Her estate is approximately £675,000 (a house worth around £650,000 and other assets amounting to £25,000 or so).
She wishes to leave this to her son but, at the same time, wishes to create a nil rate band (NRB) discretionary trust with the £325,000 NRB and two years worth of £3,000 exemptions, ie £331,000 to go to the trust. The beneficiaries of this trust will be her children and grandchildren. The remainder £344,000 will go to one of her children. To sum up: a) legacy to the trust £331,000 (being a debt on the house); b) house and other assets to child, subject to the debt of £331,000.
Alternatively, if possible, the intention is to use up £331,000 plus her late husband’s £325,000 NRB (if available) to transfer assets of £656,000 to the trust for asset protection and avoid increasing the children’s estate for IHT going forward.
Can her estate benefit from the late husband’s £325,000 NRB and £175,000 residential NRB? If so, with the total £325,000 x 2 plus the two years annual exemptions totalling £6,000, can she move the house to the trust free of IHT and have the remainder left to the children as a £19,000 debt on the house due from the trust?
Readers’ views would be appreciated.
Query 20,535 – Puzzled.
Is transfer of property share a transfer of going concern?
My clients are a father and adult son who jointly own a commercial property which they acquired for £115,000 plus VAT four years ago. Initially the property was used in a partnership trade carried on by father and son. Subsequently the partnership trade was transferred to a limited company and the situation now is that the partners opted to tax the property and are now renting it with VAT applied to the rent to the limited company which they own.
It is now the father’s intention to gift his half-share of the VAT opted commercial property to his son for no consideration. In addition, the father intends to gift his 50% shareholding in the trading company to his son, once again for no consideration.
The property now is probably worth around £130,000. The value of the trading company is low at the present time as profits are modest.
My question is, does the transfer of the half-share of the property from the father to the son qualify as a TOGC as the property will carry on being rented out to the company by the sole son.
Readers’ thoughts would be appreciated.
Query 20,536 – Partridge.
What are the reporting obligations for contractor?
My client runs a small construction company and is registered as a contractor under the construction industry scheme (CIS). The company mainly deals with larger building projects like garage extensions, loft conversions and large home remodelling jobs. As part of these jobs, my client hires a large number of tradesmen.
During the 2024-25 tax year, he hired several subcontractors and paid them a total of £120,000. My client correctly deducted 20% CIS tax from registered subcontractors and 30% from one unregistered subcontractor.
My client has come to me because he is unsure about his CIS reporting obligations.
I am pretty confident of the answer, but I would very much welcome confirmation from Taxation readers on the following points:
- What are his responsibilities regarding CIS deductions, reporting to HMRC, and issuing payment and deduction statements to subcontractors?
- What are the potential consequences if he fails to meet these obligations?
Query 20,537 – Rex.
Event admission plus photo booklet: multiple supply?
One of my clients is planning an ‘immersive experience’ in London, where every audience member will get to enjoy the experience and will also receive a photo booklet to take away after the event. It is their understanding that photo booklets are considered to be zero rated for VAT purposes. Is this correct?
Assuming the answer to the previous question is ‘yes’, our client has said that the usual price of a photo booklet at a London based immersive experience is £15. My questions are as follows:
- If my client sells an off-peak bundle for £25 including the experience and photo booklet, can we say that the ticket element that is subject to 20% VAT is £10 and the photo booklet element is £15 and zero rated? Therefore, the VAT element of the total £25 is £1.67 ie £10 x 1/6.
- A prime time ticket bundle costing £35 would be £20 vatable for the ticket element and £15 zero rated for the photo booklet – making the VAT element £3.33. Is this OK?
There will be no option to buy the ticket separately, ie the photo booklet and experience come as a package.
Can Taxation readers help me with this brain teaser?
Query 20,538 – Laser Liz.
Queries and replies
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