It may well be that the IHT will be at odds with the decision to keep the properties in a company. As mentioned previously on the thread, each case to be looked at on its own facts. Is the client near retirement? How important is BPR? etc
The importance of Inheritance Tax Business Property Relief (“BPR”) is well understood: the securing of effective exemption from inheritance tax for qualifying assets will in many cases represent a significant tax saving. The operation of this relief is however, far from intuitive and particular issues arise in respect of cases typically comprising shareholdings where there is a mixture of trading and non trading activity.
BPR is given to what is termed relevant business property. The definition of relevant business property is taken to include (subject to exclusions) any shares in unquoted companies.
The principal exclusion for shares in unquoted companies from the definition of relevant business property is where the shares in question are in a company whose business, consists wholly or mainly of dealing in securities, stocks or shares, dealing in land or buildings or making or holding investments (referred to as excluded classes).
If one was to try and take specific advantage of the £150 exemption for an unpaid director or one who is paid £1 you may find that any benefit is extinguished by the cost of an enquiry from HMRC.
Loans to traders The only way I can think of for relief is s253 TCGA 1992 Relief for loans to traders. But this gives capital gains loss relief. Not sure whether relief against trading income is at all possible.
Not if the companies were connected It would appear that the original loan would fall under the loan relationships code. If the two companies are connected when the lending company writes off the loan there will be no relief.
After liquidation of the second company, the two companies would normally not be connected, however the first company should normally have written the loan off before the second company goes into liquidation (under GAAP). Also, if a company is connected for part of an accounting period it is deemed to be connected for the whole accounting period.
Therefore, it would appear there would not be any relief against trading income.
No mitigation Note that if there are seven partners there would be seven sets of penalties.
The penalties for late submission of partnership returns are fixed (there are also daily penalties if a direction to submit the returns has been made and has not been responded to).
Your understanding is correct; the fixed penalties cannot be mitigated on the grounds that there are no taxable profits because the partnership as such is not liable for tax in any case.
Allowable These costs are incurred during the process of recruitment and therefore appear to satisfy the wholly and exclusively test. No different from any other costs of recruitment. I agree allowable.
Control Simply being a Director will not necessarily mean that the companies are associated. Association would depend on whether you can excercise "control" over the companies either alone or together with an associate (e.g spouse).
My answers
I suppose the owner / business should do separate tax returns?
Legally it is the same person as there is no limitation of liability. Speaking of 'accountancy school' and 'numptiness'. No obligation, no accrual.
IHT consequences
It may well be that the IHT will be at odds with the decision to keep the properties in a company. As mentioned previously on the thread, each case to be looked at on its own facts. Is the client near retirement? How important is BPR? etc
The importance of Inheritance Tax Business Property Relief (“BPR”) is well understood: the securing of effective exemption from inheritance tax for qualifying assets will in many cases represent a significant tax saving. The operation of this relief is however, far from intuitive and particular issues arise in respect of cases typically comprising shareholdings where there is a mixture of trading and non trading activity.
BPR is given to what is termed relevant business property. The definition of relevant business property is taken to include (subject to exclusions) any shares in unquoted companies.
The principal exclusion for shares in unquoted companies from the definition of relevant business property is where the shares in question are in a company whose business, consists wholly or mainly of dealing in securities, stocks or shares, dealing in land or buildings or making or holding investments (referred to as excluded classes).
Only academic
If one was to try and take specific advantage of the £150 exemption for an unpaid director or one who is paid £1 you may find that any benefit is extinguished by the cost of an enquiry from HMRC.
Amend returns
It appears that the prior returns should be amended under the overpayment relief provisions (the replacement for the old Error or mistake relief).
Loans to traders
The only way I can think of for relief is s253 TCGA 1992 Relief for loans to traders. But this gives capital gains loss relief. Not sure whether relief against trading income is at all possible.
Not if the companies were connected
It would appear that the original loan would fall under the loan relationships code. If the two companies are connected when the lending company writes off the loan there will be no relief.
After liquidation of the second company, the two companies would normally not be connected, however the first company should normally have written the loan off before the second company goes into liquidation (under GAAP). Also, if a company is connected for part of an accounting period it is deemed to be connected for the whole accounting period.
Therefore, it would appear there would not be any relief against trading income.
Hope this helps.
No mitigation
Note that if there are seven partners there would be seven sets of penalties.
The penalties for late submission of partnership returns are fixed (there are also daily penalties if a direction to submit the returns has been made and has not been responded to).
Your understanding is correct; the fixed penalties cannot be mitigated on the grounds that there are no taxable profits because the partnership as such is not liable for tax in any case.
Hope this helps.
Allowable
These costs are incurred during the process of recruitment and therefore appear to satisfy the wholly and exclusively test. No different from any other costs of recruitment. I agree allowable.
Yahoo
You can get historical share prices here
http://uk.biz.yahoo.com/uk_trading.html
search for the company/share - once found on the left column there will be an option to select historical prices.
Hope this helps
Dipesh
Control
Simply being a Director will not necessarily mean that the companies are associated. Association would depend on whether you can excercise "control" over the companies either alone or together with an associate (e.g spouse).