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New queries: 9 September 2021

07 September 2021
Issue: 4807 / Categories: Forum & Feedback

Capital gains

Reporting on sale of farmhouse and outbuildings.

My client is in the process of selling their main residence which consists of a farmhouse, 30 acres of farmland and four residential outbuildings.

The residential outbuildings were converted from barns and an old stable block. The sale of the house, farmland and residential outbuildings are all being sold as one single transaction.

When reporting the capital gains tax on the sale of the outbuildings, can readers please advise whether I need to report the gain on the outbuildings as one disposal or do I need to report the gain on each property separately, ie make four separate UK property capital gains tax returns?

I also assume that as the farmhouse is fully covered by only or main residence relief, that part of the disposal does not need to be reported within 30 days of the completion?

I look forward to readers’ thoughts on this matter.

Query 19,815 – Farmed Out.

Trust return

Is a deed required when filing an annual trust return?

We have been approached by the trustees of a life interest (IPD) trust to take over the filing of the annual trust returns.

It would appear that the trust was set up in the late father’s will for the benefit of his daughter. The asset is the house she is living in plus some investments for income, and her children are the remaindermen beneficiaries.

The father died 15 years ago, and the trust has been registered with, and filing returns with, HMRC. However, there does not appear to be a trust deed and the land registry has the house in her name only.

I have two questions:

  • Would it be correct for us just to rely on the terms of the will to continue to file trust returns for the income, and possibly the proposed sale of the property, without a trust deed?
  • Can the trustees commission a deed to start from the date of the father’s will and should the land registry details be changed?

Readers’ comments would be appreciated.

Query 19,816 – Trustworthy.

Invoicing strategy

Consultancy services and invoice date.

I act for a client whose limited company consultancy business has enjoyed a successful trading year due to lockdown issues. He is not registered for VAT and has been closely monitoring the total of his rolling 12-month sales invoices, checking that the total has never exceeded the registration threshold of £85,000.

However, he established that his annual sales would exceed £85,000 on 30 June which, by coincidence was the end of his financial year. So, to avoid a problem, he changed his policy of invoicing his clients from the final day of the calendar month to the first day of the next one, ie he invoiced clients for his June work on 1 July, keeping his annual sales to 30 June below £85,000.

My queries are twofold:

  • Is this acceptable as far as VAT registration is concerned? The new invoicing strategy means his annual sales will never exceed £85,000 as his turnover gradually reduces to pre-lockdown levels.
  • He says that I should not include his June sales as work in progress in his year-end accounts because this could trigger a potential query from HMRC because the turnover figure will then exceed £85,000. His view is that a sale is only certain when he raises his invoice, ie on 1 July with his new strategy. It just means that HMRC will get their corporation tax payment one year later.

I look forward to finding out what readers might think about these issues.

Query 19,817 – Timelord.

Spanish retirement

Can the Spanish authorities tax a civil service pension?

My client is a British national who has retired to Spain. His state pension is paid void of UK tax because he has a Spanish tax residency. He declares his UK state pension in Spain every year.

However, the client has recently received a letter from the Spanish Agencia Tributaria that he should declare his civil service pension in Spain. I am worried because this might be for the purpose of assessing his tax status.

Can readers advise me whether the Spanish tax authorities can legally use the client’s civil service pension to assess his tax status and presumably deduct further tax from the civil service pension. Would such an act be in direct contravention of the double taxation agreement that in effect would mean being taxed twice on the pension?

I look forward to hearing from readers who may have come across a similar situation.

Query 19,818 – Worried.

Issue: 4807 / Categories: Forum & Feedback
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