Member Since: 21st Nov 2001
Tax Consultant Raven Taxation Ltd
23rd Dec 2019
On 23rd Dec 2019 | marcia.bowers Wrote:
"My client did consent to the assets being sold. Four of the beneficiaries sold their shares in July 2016 but two retained the holdings personally. My client just didn't bother to tell me about it until he got a copy of the distribution statement over two years later. Don't know why such a long delay."
Ah well - I wouldn't be too bothered if he had penalties to pay then. Maybe it will be a lesson learned!
23rd Dec 2019
The OP doesn't say that the benficiaries didn't give permission - maybe they did. I wouldn't bank on HMRC reducing the penalties if the client was aware that there was income and/or gains even if they didn't have full details - but there's no harm in trying! They might not have been aware that the gains would be taxable on them if the assets were sold by the trustees (or even that there would be gains if there was a CGT uplift on the life tenant's death). I work with a lot of accountants on trust issues and many of them don't really understand the tax implications until I explain them so I wouldn't be surprised if the beneficiairies had no idea they would have a tax bill!
23rd Dec 2019
Assuming that your client became the beneficial owner of a share of the trust assets on the grandmother's death, the income and gains would be taxable on them in the year they arose - not when the money was distributed. But, if you don't already know for sure, you need to check that none of the income or gains were taxable on the trust - i.e. that your client did actually become a beneficial owner on their grandmother's death rather than the trust continuing and then being wound up subsequently.
I'd explain about the late provision of information by the trustees in the letter telling HMRC about the income and gains in years which are now out of date to amend online. They may reduce the penalties - it's worth a try!
2nd Dec 2019
That's exactly what I was going to say. I'd hate it if I got engagement letters every year. But then I do read everything I sign so it would be time consuming!
1st Nov 2019
I've never liked the idea of kids knocking on doors asking for stuff so mine didn't do it. I avoided it this year by taking my son to see Joker at our local Curzon. Brilliant film!
31st Oct 2019
I'm surprised to hear that HMRC are confused about the correct treatment as this is pretty standard stuff. Dividends and interest are taxable even if reinvested by the portfolio manager - but then the reinvested amount, if used to purchase new securities, is additional expediture for CGT purposes. If this is not a simple portfolio but some sort of bond/ISA/pension/investment wrapper, then it could be different.
13th Sep 2019
An assignment of royalties can create a market value amount charged to income tax not CGT so you need to get proper advice before recommending this course of action. I imagine the final questions can probably be answered by searching the Internet or, if your client is happy to pay, by consulting a lawyer who deals with that area.
8th Aug 2019
26th Jul 2019
Not if you have a car with wing mirrors that fold in when you lock the car!
10th Jul 2019
I give Nick advice but I was on holiday last week - cooking in 35 degrees heat in Tuscany! He has said that he is happy for me to post on here the advice I have given him today, to facilitate discussion on this point. No doubt some of you won't agree with what I have said but I'm sure we can have a mature discussion about it! I've had a quick look at legislation and referred to it but I haven't done a detailed analysis of all the relevant legislation because the question didn't warrant that amount of time (and cost) so if someone has a more considered answer with other legislative references, I'd be very happy to see it. Here's my view, for what it's worth!:
"The partnership return guidance notes (2018) say:
‘You should return details of the partnership’s trading and professional income and expenditure for the accounting period, or periods, ended on a date in the period 6 April 2017 to 5 April 2018.’
Which sounds unequivocal but it then goes on to say:
If no accounts end in 2017 to 2018
You should try to make sure that there’s at least one accounting period ending in 2017 to 2018. If you don’t, the partners may have to use estimates to calculate their tax liability for 2017 to 2018 and could end up being charged interest if the estimates are too low.
But then, in the same section, says:
If no accounts end in 2017 to 2018 you should:
• provide details of the partnership’s income and expenses for the period 6 April 2017 to 5 April 2018
• enter 6 April 2017 to 5 April 2018 in boxes 3.4 and 3.5
Though clearly you couldn’t enter a start date of 6 April 2017 when the trade commenced during the tax year and the actual income and expenses for the period falling within the tax year may bear no relationship to the taxable figures when the first accounts are apportioned and are highly unlikely to be available.
The legislation in the TMA – s12AB - actually says that a partnership statements should be prepared to show income of ‘the period in respect of which the return is made and each period of account ending within that period”. This wording was substituted for “each period of account ending within the period in respect of which the return is made” in 1996. So arguably that means you do show the income falling within the tax year if there is no period of account ending in that year – but if you interpret it that way then you would surely also have to interpret it as meaning you need to show income and expenditure for an accounting period ending in that year (if there is one) and for the period after the accounting date ends up to 5 April following because the legislation says ‘and’ not ‘or’ - and that is clearly nonsensical!
I believe the simplest way is that you do not submit figures for the accounting period which ended on 31 December 2018 as it didn’t end between 6 April 2017 and 5 April 2018. But the partners should then put estimates in their personal returns to minimise interest and explain this in the white space. Provided HMRC get a partnership return showing all the taxable profits for the first period of account (i.e. the 2018/19 partnership return) and the partners declare the correct amounts, a return has been submitted, no tax is lost and everyone is happy. If you prepare partnership statements showing apportioned profits for a period which didn’t end in the year and then show those profits again on the next year’s returns, I would say you have overstated the tax adjusted profits for the partnership. The profits are, of course, partially taxed twice and an overlap relief figure calculated but not on the partnership tax return and including them twice is going to just cause confusion for the individual partners."