Yes you can claim AIA, treat it like a normal capital allowances comp. There are 2 comps time apportioned between pre and post hive up. No balancing adjustments
Thanks, when you say time apportioned I assume you are referring to WDA? Re: AIA each company gets AIA on their own additions? (all the additions are in the pre hive up period)
Re: s41 Yes I did read that share purchase agreements note. Surely this is intended to catch a scenario where say there is an arrangement for husband (or wife) to reacquire the shares that have been disposed of to trigger the associated disposal (ie. It was a sham disposal solely used to trigger an ER claim).
I see this whole scenario is not as cut and dry as I had hoped, but I am still struggling to see any sound reason why this would not work so I'm leaning towards Duhamel's opinion.
Thanks for the replies everyone, clearly an interesting topic!
Xi NG - Withdrawing from the business can be done either fully or in part. A partial withdrawal from the business (eg. if a partner is winding down and goes from say 5 days a week down to 4 days a week) will still qualify for ER in the same way that reducing from 50% shareholding to 40% would so I'm struggling to agree with your point? Apologies if I'm missing something here.
JamesAnd - CG63995 condition 1 appears to state that there is no requirement for there to be a gain, or for ER to be claimed on the share disposal which i think sounds quite positive? All it states is the individual needs to dispose of shares in the company (which he would be).
I'm not sure if you are slightly mis-reading what I said, or just agreeing with me. I was just backing up my intial point and pointing out that Xi Ng appears to conflict with HMRC, although HMRC's intrepretation is more beneficial in this instance.
Apologies for the confusion! I read the comment and assumed it had been written by "Xi Ng" pointing me to CG64000.
To confirm, yes i do agree with you and the guidance at CG64000 appears to back this up.
Xi Ng - I suggest you take a look at CG64000, which covers disposals made at different times and to different people. You may say that this isn't the law, but it is HMRC interpretation. The material disposal must be “part and parcel” of the same event, even if the associated disposal is made sometime after the material disposal.
As far as i can see, the two examples HMRC give at CG64000 both qualify for ER. In fact the second example gives the example of them selling trade and assets to one person and property to another, and that still qualifies for ER even two years after the share disposal.
The disposal of property in my example will be done at the same time as the share disposal.
Duhamel - on the face of it yes, the changes in the FA15 just confirm that the minimum amount required to qualify is a 5% disposal, which in this case would be met.
Kiwilondon99 - the wife is not disposing of anything so her holding is not important. Husband is disposing of an asset used in the business and at the same time, disposing of some of his shares in the company to his wife.
Xi Ng - Just because an individual is selling the shares to one person and the property to another person does not mean it is not part of the same withdrawal from the business. There is no requirement that these disposals need to be to the same person/entity.
...the reason HMRC say that previous rent is not an issue may be that the new owner’s gain has only accrued since rent stopped being paid, whereas in the case of husband and wife, the gain has effectively accrued over the husband’s period of ownership too so I don't know whether they would take the same view in our case?
Sorry, there will be a material disposal. Wife will be retiring from the partnership.
S169K(4) states that property must be used by the partnership in the 12 months prior to disposal (which it would). There does not appear to be any requirement for wife to actually own the property for those 12 months?
And regarding rent - see S169P(4)(d) - restricting for market rent received, but do we restrict for rent received by previous owners? The more i read this, the more i think we WILL need to restrict for rent as it mentions any rent received while property used by partnership.
My answers
Thanks, when you say time apportioned I assume you are referring to WDA? Re: AIA each company gets AIA on their own additions? (all the additions are in the pre hive up period)
Re: s41
Yes I did read that share purchase agreements note. Surely this is intended to catch a scenario where say there is an arrangement for husband (or wife) to reacquire the shares that have been disposed of to trigger the associated disposal (ie. It was a sham disposal solely used to trigger an ER claim).
I see this whole scenario is not as cut and dry as I had hoped, but I am still struggling to see any sound reason why this would not work so I'm leaning towards Duhamel's opinion.
Thanks for the replies everyone, clearly an interesting topic!
Xi NG - Withdrawing from the business can be done either fully or in part. A partial withdrawal from the business (eg. if a partner is winding down and goes from say 5 days a week down to 4 days a week) will still qualify for ER in the same way that reducing from 50% shareholding to 40% would so I'm struggling to agree with your point? Apologies if I'm missing something here.
JamesAnd - CG63995 condition 1 appears to state that there is no requirement for there to be a gain, or for ER to be claimed on the share disposal which i think sounds quite positive? All it states is the individual needs to dispose of shares in the company (which he would be).
Apologies for the confusion!
Apologies for the confusion! I read the comment and assumed it had been written by "Xi Ng" pointing me to CG64000.
To confirm, yes i do agree with you and the guidance at CG64000 appears to back this up.
Thanks
CG64000
As far as i can see, the two examples HMRC give at CG64000 both qualify for ER. In fact the second example gives the example of them selling trade and assets to one person and property to another, and that still qualifies for ER even two years after the share disposal.
The disposal of property in my example will be done at the same time as the share disposal.
Thanks for the responses.
Duhamel - on the face of it yes, the changes in the FA15 just confirm that the minimum amount required to qualify is a 5% disposal, which in this case would be met.
Kiwilondon99 - the wife is not disposing of anything so her holding is not important. Husband is disposing of an asset used in the business and at the same time, disposing of some of his shares in the company to his wife.
Xi Ng - Just because an individual is selling the shares to one person and the property to another person does not mean it is not part of the same withdrawal from the business. There is no requirement that these disposals need to be to the same person/entity.
Good point
Yes that is true - it is a difficult point.
We do have Kevin Slevin's guide (which is really good by the way), but unfortunately it does not cover this particular point.
Although thinking this through....
...the reason HMRC say that previous rent is not an issue may be that the new owner’s gain has only accrued since rent stopped being paid, whereas in the case of husband and wife, the gain has effectively accrued over the husband’s period of ownership too so I don't know whether they would take the same view in our case?
Thats a good example...
.... in CG64145 and pretty much covers my exact scenario so thanks for finding that.
OK, I'm "almost" comfortable with this now but will warn the client that this is a contentious point.
Thanks for your help chicken farmer!
Sorry, there will be a material disposal. Wife will be retiring from the partnership.
S169K(4) states that property must be used by the partnership in the 12 months prior to disposal (which it would). There does not appear to be any requirement for wife to actually own the property for those 12 months?
And regarding rent - see S169P(4)(d) - restricting for market rent received, but do we restrict for rent received by previous owners? The more i read this, the more i think we WILL need to restrict for rent as it mentions any rent received while property used by partnership.