News & Events

Taxation of Buy-to-Let Properties

In 2015 the UK Government set out its Five Point Plan for housing which was designed to stimulate housing supply and encourage first-time ownership. Support such as this was welcomed by many as the impact of the global financial crisis, and the critical effects this had on the property development sector, continued to be felt by first-time buyers as they battle astronomical rents and house prices worsened by low salaries. Alongside the introduction of affordable homes, and enhancements to the Help to Buy scheme, the Government has over recent Finance Acts introduced a number of tax changes imposed on buy-to-let investors presumably with the intention of deterring investors from investing further, which the Government believes will free up property for owner-occupiers. Read more

Voting rights and entrepeneurs’ relief

In George v HMRC, the First Tier Tribunal (FTT) decided that they could not impute voting rights to shares for the purpose of a shareholder being able to claim entrepreneurs’ relief (ER). One of the conditions to claim ER is that the individual is able to exercise at least 5% of the votes in the relevant company “by virtue of” their shareholding in the company.

VAT| HMRC | Case StudyIn this case, Mr George had been appointed a director in a family-owned company, Thornton & Ross Limited (TLR) which was thereafter managed by one of the family members (Mr Jonathan Thornton) and Mr George. A few years after joining the company, Mr George was allowed to acquire shares in the company. The shares acquired by Mr George represented 6.9% of the nominal value of the company’s ordinary share capital but did not carry any voting rights. Following a failed attempt to sell TLR, at which time Mr George was advised that he did not qualify for ER because his shares did not carry any voting rights, Mr George and Mr Thornton agreed that shares would be given voting rights, so as to secure ER. This agreement was not documented immediately. In addition, the company’s accountants were concerned that giving voting rights to Mr George would result in a ‘value shift’ tax charge falling on the other shareholders. As a result of this, despite the agreement, the rights were not formally granted to the shares held by Mr George until almost 12 months later.

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Early budget and expected changes…

VAT| HMRC | Case StudyPhilip Hammond will deliver the Budget speech on Monday the 29th October 2018, and this year’s budget brings a change from tradition, as it will be held on a Monday instead of the usual Wednesday. This Budget is also presented earlier than normal to accommodate Brexit talks and negotiations scheduled to happen during November, with The Chancellor also under pressure to deliver a budget which will find funds to support vital public services and provide a buffer from the effects of Brexit.

Speculation as to the content of the Budget is rife already, and so, in our tradition, we take the opportunity to touch on some of the key points and what we think we know so far.

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Business Succession and Inheritance Tax…

Clients regularly talk to us about their key points of concern when considering what the future will hold for their valuable assets once they have passed away – squandered inheritance or claims on the estate, and Inheritance Tax.  

Following death, legacies can be carved up by squabbling families, spent or claimed against as part of divorce proceedings, turning valuable, profitable and income producing businesses in to no more than a headache for the recipients of a will.  

Inheritance Tax (“IHT”) can worsen that headache significantly; often publicised as the UK’s most hated tax, it broadly operates by taxing the value of a person’s estate which is over and above the nil rate band (currently £325,000). 

While the nil rate band has been frozen since 2009, property (perhaps the most often inherited asset class except from cash) prices have risen significantly, which has resulted in more and more estates and households becoming liable to the tax.  

IHT can be complex and where due consideration and foresight has not been given, dismay and confusion can ensue at what is generally one of the most emotional periods of our lifetimes. 

Proper planning and forethought can moderate the complexities involved with succession and IHT and can help to provide clarity and control to the taxpayer and their loved ones. With proper planning and support It is possible to protect and retain assets intended to be bequeathed for future generations. We have set out an example below of the planning process a family might go through and the benefits that they and their family could enjoy as a result: 

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