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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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Treasure Trove of Tax Breaks & Reliefs Unclaimed!

The Government recently published a press release which highlighted how certain reliefs and tax breaks continue to be underutilised by taxpayers; whether this is due to a lack of awareness of the reliefs or hesitation and uncertainty over eligibility we cannot be certain, but as the Government is effectively giving away millions of pounds in cash which could help to improve an individual’s cash flow or a business become more profitable, we wanted to look into some of these well-known but not so well-used reliefs and tax breaks in greater detail:

Marriage allowance

Marriage Allowance was introduced in April 2015 and it allows a non-taxpaying spouse or civil partner to transfer up to £1,190 of their personal allowance (currently £11,850) to their partner thereby increasing their allowance and decreasing the amount of their income that is liable to tax, making it a valuable relief to take advantage of if eligible.

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Current State of Tax Affairs for Buy to Let Landlords

Over recent years the Government have implemented a series of targeted tax changes designed to bring buy-to-let landlords “in to line” by effectively increasing their tax burden, with the overarching intention of discouraging multiple home ownership and creating an encouraging environment for first time buyers.

Recent reports show that growth in the rental market has slowed, however, it is difficult to attribute this to the tax changes alone, as property prices remain high, rental stock is low, and mortgage regulations are being tightened, all of which can impact on a person’s decision to rent or buy property.

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