Is it that simple?
One of my clients is a successful family company that is probably worth in the region of £5m to £6m. There are four ordinary shares in issue, one each held by father, mother, son and daughter. All work full time in the business, but father and mother now want to step back and retire. They are happy for their shares to go to the children so that the company will be owned 50-50 by son and daughter. They don’t want any money for the shares as they have other wealth. They have suggested that their shares are simply cancelled for no consideration, leaving two shares in issue, held by the children. They propose, perhaps after speaking to the ‘man in the pub’, that this can be done without any tax consequences.
That doesn’t seem right to me, but I am struggling to give a definitive answer. Can readers help me here, please?
Query 20,811– Perplexed
Getting used to MTD
One of my clients is using a spreadsheet to prepare accounts for making tax digital (MTD) filing for the first time this year, and I am using bridging software to make the returns. Because the process is unfamiliar to the client, he made a number of amendments to the way the spreadsheet was put together between Q1 and Q2. I hope that this is acceptable as part of the learning process, but is it correct in principle? My understanding is that, once an entry has been made in the digital records, it should not be changed – it can only be corrected by a later, separate, entry. I am satisfied that both the Q1 and Q2 filings were correct, but they were based on slightly different spreadsheets. Should I worry, or is it a case of ‘no harm, no foul’?
Query 20,812– Reacher.
Equipment sales by overseas firm – UK VAT registration?
We act for a medical business based in Switzerland that rents a site in the UK that is used for research and development activities. There are no taxable sales made from the site, so the Swiss company has never registered for UK VAT. However, there have been several purchases of major equipment in the UK and the VAT has been recovered by submitting an overseas refund claim to HMRC.
The company has now decided to sell some of the equipment and has two potential buyers. One is a French company based in Paris, which will receive the goods after they have been shipped to France by our client. The other potential buyer is a UK-based charity, which says that it does not need to pay VAT as the equipment will be used for its own charitable research work. Is this correct?
Can readers explain the VAT outcomes in both cases, ie whether my client needs to register for UK VAT and charge VAT on the sales, which will total about £350,000?
Alternatively, would a potential VAT-saver be to sell some of the equipment to the UK charity, but for a value that is less than the UK registration threshold of £90,000, and the balance to the French business, which I guess will be a zero-rated export of goods, so not subject to VAT?
Query 20,813– Research Rita.
Whose income is it?
My client’s mother died in summer this year and I have been asked to advise on the tax aspects of the distribution of her estate. She left everything to her daughter (my client). My client felt strongly that some of her relatives should have received something from the estate and so has entered into a deed of variation with two cousins, under which they receive some shares that her mother owned. Dividends have been paid on these shares at various times since the mother’s death before the deed of variation.
Who is taxable on these dividends? Is it my client, because at the time the dividends were paid, the shares had passed to her under the will, or the cousins, because the deed of variation treats them as having received the shares immediately on death?
Query 20,814– Adviser.
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