Another week, another flurry of activity
Hello again, dear reader. Another week, another flurry of activity, as follows:-
A visit to a professional partnership in Surrey, much marred by horrific traffic on the M25 (there and back!).
Still, the clients are happy, because we explain a strategy that will reduce the business’s exposure to employer’s NICs (by promoting a couple of senior employees to partner (LLP member, actually) whilst providing the right motivational message to the up-and-comers.
Our message about managing the onerous 51% income tax/NIC liability (52% from next April) by partly incorporating their structure goes down even better.
Engagement Letters and works orders are signed and its back to the office (slowly) to get on with the work.
Up to the West End to meet one of our non-UK domiciled property investor clients, who is bemused by the amount of attention he seems to be receiving from HMRC, for no good reason. It is agreed that it is time for HMRC to “put up or shut up” and we will ask the Tax Tribunal to direct HMRC to issue a closure notice in respect of their enquiries, which are little more than the proverbial fishing expedition. A robust letter to HMRC, and an application to the Tribunal, will be drafted. The client is not especially happy, but is pleased to know that HMRC will not be allowed to walk all over him.
A farming orientated client has plans (literally) for his house and adjoining stable-block.
The pressing question is how will this be treated for CGT (or other tax) purposes? He is concerned that HMRC might seek to tax gains if they can be attributed to development value.
There are indeed many pitfalls for the unwary and ill-advised, but the client is neither of these things. He is pleased to hear that HMRC do not seek to deny CGT main residence relief, simply because a house-owner has obtained planning permission on part of their house and grounds. I warn him that attempting to sell the stables whilst retaining the house would almost certainly be attacked by HMRC on the basis that the asset being sold was not a main residence, or part of the main residence, as defined. However, the plan is to sell the whole lot (house, garden and stable-block) in one contract and leave it to the purchasers to undertake whatever development they think fit. On that basis, any gain made will be exempt under the main residence rules, even though the client will have caused the gain to be maximised by obtaining planning permission.
Another happy client!
A friendly divorce lawyer is perplexed by his client’s spouse’s claim to be hard-up as a result of being liable for two lots of income tax on his earnings, resulting in an overall tax rate of 66%.
Can this be true?
It is true that the UK does not have a comprehensive double tax treaty with the state that pays his salary (namely Hong Kong), but that does not mean that double taxation will inevitably apply. The UK has a system of so-called unilateral relief in such circumstances, so that any Hong Kong tax suffered gets relieved in the UK by being knocked-off the UK tax liability on the income in question. A report is written to the solicitor explaining the rules and he will do battle to get more maintenance for his client on the basis that the spouse’s net income is rather more than previously disclosed. I wonder what the Family Court will make of it!
A meeting with a potential new client, who was impressed with the information he received when he attended a seminar given by two of our “bright young things”. Why don’t his existing accountants provide such seminars for their clients? Ask them, not us!
There are various issues that need to be addressed, particularly as regards the timely production of management information and we can help with that.
There are also issues concerning “international transfer pricing”, i.e. the manner in which cross-border charges are levied by/to the international parent company and the various international subsidiaries. We can help with that too!
A good meeting and we will be appointed, if we can agree the price. Well done to the “bright young things”!
We win another new client, with slightly unusual circumstances…
The director has a large credit balance on his loan account in respect of which a healthy (too healthy?) rate of interest is charged. The previous accountants have diligently accrued for the interest for the last few years, but the company has not paid the interest to him so the accrued interest languishes on the balance sheet in, err, accruals. As the interest has not been paid, the company has not had to deduct tax from it, and the director has not had to declare it on his personal tax returns. However, the fact that accrued interest that remains unpaid for 12 months is not corporation tax deductible seems to have passed the previous accountants by. The arrears of corporation tax are some £80k; interest and penalties could easily create a liability of £125k! The client is furious (but now remembers why the old accountants had to be sacked). A payment on account, and a full disclosure of the position, needs to be made immediately to HMRC to minimise interest charges and potential penalties. The previous accountants are asked to explain themselves, and advised to brace themselves for a writ!
The weekend arrives; I have a relaxing time with the in-laws (and the pigs) to look forward to.
And so to bed…Talk to Barnes Roffe today