HMRC Manual VATLP19830 says
"There have been many court decisions that support HMRC’s view that chair rentals by hairdressing salons are standard rated supplies. In 2007, the High Court commented that the Tribunal’s reasoning in Mallinson & Woodbridge provided “a compelling analysis showing why in all chair letting hairdressers’ arrangements… the supply cannot properly be categorised as the letting of immovable property” [Denyer, CH/2007/APP/0361, paragraph 44].
In Christopher James Denyer (CH/2007/APP/0361), the High Court found that chair rentals were standard rated."
If it is standard rated one would assume chair rental is included in the trading turnover. But presumably the Income tax guidance indicates that certain chair rental situations such as this ie where it is not just temporary surplus area and a clear intention to buy the property for investment, would fall outside that VAT guidance
The confusing part is that in that tribunal quote they say in "all chair letting hairdressers arrangements" and yet there seems room to question that.
Just another thought on the selling of shares in tranches. Am I right that on resigning as a Director at the time of the Buyback, ER would not have been allowed on the later disposals?
Sorry I realise that it cant be a buyback in instalments. So they have to have the loan in order for it to be a buyback. So the whole £30k would presumably have to be treated as a distribution in the year of the buyback.
That would have been a helpful innovation though!
What would help is if the 12k that was loaned back and being repaid in monthly instalments could be recategorised as simply distributions when the payments are made as it would split his payments into more tax years and reduce higher rate tax.
I didn't stop wondering. But they wanted to do the transaction quickly which didn't help.
Fortunately, treating as a distribution doesn't actually make much difference to the tax in their case because of very little higher rate tax involved.
In fact if he hadn't taken other dividends in the year it would have been preferential not to be treated as a capital transaction.
Thanks everyone for your comments. Its a shame that the company didnt have any other amounts owing. So of course the loan back from the ex Director/Shareholder was then over 30% of the companies amounts owing.
But maybe if they hadnt done the loan and simply paid him that part of the £30k in instalments it would still be treated as an amount owing to him.
In which case it would only really have been solved by increasing the numbers of shares and then selling in tranches. Hindsight.......
I had wondered about that. He only had one of 3 shares. But if we had increased the number of shares first then he could have sold them in stages.
I did apply for clearance but they wanted to do the transaction quickly so we didnt get hmrc response in time.
I had warned them it could be treated as a distribution
I thought the 18k would have qualified for capital treatment if no loan on the remainder as then he would have been unconnected. But maybe the instalments paid would mean he was still treated as connected in any case
If so then i dont see that i could have advised them a better course of action anyway
Thanks for your input