The use of the word “job” on form P46 (or ‘starter checklist’) does not follow statute.
If you refer to Regulation 46(2) of The Income Tax (Pay As You Earn) Regulations 2003 (SI 2003/2682) you will note that the references are to “employment” rather than “job”. Indeed, statement B given in that Regulation specifically states “disregarding any self-employment”.
To continue the pedantry, the statement "Companies don't pay CGT" is also incorrect.
In the UK , companies pay corporation tax both on their profits and on their capital gains. CGT is a tax for individuals only.
What tax applies to ATED-related gains, John?
Given that s.323B refers to “the tax year”, I can understand the confusion....!
Of the two explanations you have received, the one that says you pay tax in the UK because the company’s work that generated the profits out of which the dividends were paid was carried out in the UK is the one that makes no sense to me.
I would say that the accountant is forgetting s.811, however. Of course, it’s what the OP isn’t telling us which could change the analysis.
I’m with TD, the expenses of the property are not incurred wholly and exclusively for business purposes.
As I know TD likes a citation, HMRC’s view in agreement is presented at PIM2130.
S.23 may help you in this scenario...
My thoughts (probably worth what you’ve paid for them):
An individual has a liability to Class 2 NIC where they have relevant profits of or above the small profits threshold.
“Relevant profits” means profits, from the employment, in respect of which Class 4 contributions are payable under section 15 for the relevant tax year. (S.11 SSCBA 1992).
(1) Class 4 contributions shall be payable for any tax year in respect of all profits which—
(a) are immediately derived from the carrying on or exercise of one or more trades, professions or vocations
(b) are profits chargeable to income tax under Chapter 2 of Part 2 of the Income Tax (Trading and Other Income) Act 2005 for the year of assessment corresponding to that tax year and
(c) are not profits of a trade, profession or vocation carried on wholly outside the United Kingdom.
i.e. your £10k profit falls within s.15.
Relief is given for the £4k loss under Sch 2, Para 3 when calculating the amount due for Class 4 purposes. This relief does not extend to Class 2.
I believe HMRC to be correct - the relevant profits for Class 2 purposes are those under s.15, which to my reading exclude the £4k loss (dealt with under Sch 2, para 3).
My initial view is that that interest is not allowable. To paraphrase s.392, the loan to the individual must be used to acquire any part of the ordinary share capital of a close company that is not a close investment-holding company.
At the time the loan is used to acquire shares (an historic, matter of fact test) those shares are not ordinary.
Who holds the right to convert the shares to ordinary shares - the Company, shareholder, or both?
If the right of conversion rested with the shareholder, and the Company had no power to prevent that exercise, I may be tempted to argue the shares are quasi-ordinary on acquisition, such that interest were allowable.
Only an opinion, however. I’m sure a greater mind will prove me wrong!
Gosh Kevin, this is like pulling teeth. I’ll try and put you out of your misery.
S117(a) requires the transferee (wife) to have OCCUPIED the property for the purpose of agriculture for two years prior to the transfer (her death).
Occupied does NOT mean owned.
A person who farms a property is in occupation (IHTM24072).
You have stated “Husband and wife had been in partnership for many years.”
Presumably, therefore, wife has OCCUPIED the the property for the purpose of agriculture for two years prior to the transfer (her death) and so APR would be in point, regardless of the fact that she has not owned it for two years. You’re asking the wrong question.