You might also be interested in
Replies (19)
Please login or register to join the discussion.
Appalling tax change
I wondered earlier in the year when the ridiculous controversy over private equity non-domiciled executives was raging whether taper relief would be chopped, but it seems unbelievable that it has been. After all, G Brown invented it, not some long-forgotten government of a different hue!
What with this measure, the increase in small company CT, the earlier fiasco with lower CT rates etc, one begins to fear for business property relief (and APR too).
Talking of which, what a (largely, if not entirelly) hollow gesture the IHT threshold increase is! And what about unmaried couples, siblings et al living together?
Wholeheartedly in favour of simplification but consistency and justice would be nice to have too.
Spelling?
Principle private residence relief
"principle" may be a correct spelling of the word, but I think you mean "principal" here.
Pedant
Sorry to be a pedant (hey, isn't that why I'm an accountant?) but whoever released this article clearly doesn't know how to run SpellChecker before inflicting 'withdrwawl', 'kink tst', 'CGT releifs' etc on us poor unfortunates who are already fuming at the 80% hike in business asset CGT!!!
Taper and CGT
I have just been working out the implications of dropping Taper relief on hotel owners who live on the premises and planned to sell their business to fund their retirement home.
Interesting times ahead for the industry I think....
Speling
No excuses other than I was racing against the clock to get the Pre-budget wire out. Hope it reads a bit better now, and thank you for your patience.
So what are the PPR rules now?
It looks as though the solution for 2nd (and more!) home owners is just a PPR election before you sell. What are the rules? (I'm particularly interested in couples who live in job-related accommodation - eg. clergy - and where the wife may own a 2nd home so that she has an income).
You just have to smile
The government quietly and misleadingly slips in changes that have a massive financial implication for our clients and our own businesses and what is the immediate concern of most contributors?...Spelling!!
Rollover claims will have to be reconsidered...
We will have to look closely at clients who have sold or intend to sell business assets prior to 5th April 2008 and who are considering making rollover claim as the deferred tax may be higher than it would have been had BATR remained in place.
For example client makes gains prior to 5th April 2008 of £200k. With rollover relief of £100k the CGT is £6,320. Consider then that the client disposes of new business asset for £200k in 2 years (Annual Exemption assumed £10k).
Had the rules not changed - CGT is £16,000 (Total £22,320)
With the Rollover claim - CGT is £34,200 (Total £40,520) +82%
Without the Rollover claim - CGT is £16,200 (Total £32,530) +46%
PPR and second homes
You can make an a new PPR election within two years when you acquire a second home, if you want that to become your PPR.
If you don't do this, then your main home remains your PPR.
If your second home later becomes your PPR, then you can make a claim for it to be so, whenever it does so become, even if this is outside the two year time limit for the original election.
N.B.
Always take full professional advice to go through all the details before making any claims/elections of this nature.
Plus ca change...
Trevor may be bewlidered, those of us who are getting to the stage where we have senior moments are really rather grateful. All I have to do is remember what the rules were when I first started in tax (far easier than remembering what they were last week) and just substitute 18% for 30%. Even share pooling has gone back to what it used to be.
The answer to the question is yes; the rate of CGT will be a single rate and independent of the rate of income tax.
Mike Truman
QCBs
On the QCB point, I don't think the use of a QCB will help, since s116 requires you to freeze the chargeable gain (ie the gain before taper).
When the QCB is disposed of you then subject the frozen gain to tax (ie 18% and no taper post April 08 if the new rules are enacted as is).
S2A seems pretty clear that taper is applied to the chargeable gain, rather that a factor which is taken account of in working out the chargeable gain (see s2A(2)(a), for example).
Happy to be proven wrong however!
Not sure how you could "exchange" it anyway, since you'd need to fall within s127 and have a bona-fide commercial reason for the exchange...
Adam
The corollary (or is coronary) to which ...
... I suppose could be to try and cash in the loan notes before April 2008 if possible and, if necessary, accept a simple debenture in exchange. Yes?
The QCB point is very moot ...
.. as to whether if there is a share exchange pre-April 2008 the benefit of the taper relief accrued at the date of sale is preserved. It is true that the chargeable gain is treated as accruing at the date of redemption, but under para 16, Sch A1 the taper relief is calculated at the time of the exchange.
My assumption is that para 16 will be amended so that it will no longer apply to loan notes redeemed after 5/4/2008. This appears to be retrospective or at least retroactive taxation because people who have already sold their businesses by means of an exchange of securities thought that they knew what their maximum tax bill would be. I suppose that is no different to people who thought that their gain would be indexed up from March 1982, but at least we are talking about gains which haven't arisen yet. We won't know until we see the draft legislation but it's not looking too good, so whether the loan note is a QCB or a non-QCB the taxable gain post 5/4/2008 would appear to be the same.
For business sales pre 5/4/2008 it may well be that if the sale price cannot be paid up-front the best option may be a debenture secured on the company's assets, repayable by instalments. There is no deferral of liability but quite often sufficient of the instalments will have been received to pay the tax when it becomes due and this may result in a lower liability than taking loan notes.
Daren's idea ...
... of a sale to an IIP is one which I'm trying flesh out, with a view to using it. A gift to an IIP will, I think, be a chargeable transfer for post 22/3/06 trusts as s49(1) which treats the beneficiary as entitled to underlying assets will not apply. I'll gladly defer to trust experts here but I think that's broadly it. If BPR applies I assume there is no problem with, say, a gift of shares going into settlement, but there would be an exit charge I think. You probably are not going to do this unless a sale is in prospect so the exit is likely to be soon. The IHT may not be that significant but would need to be worked out.
On the sale idea, again if we are talking about shares, there will be stamp duty at 1/2 %, but I am assuming that if the shares are sold for full market value there is no transfer of value and so no IHT.
So I guess it comes down to balancing an IHT exit charge with any SD payable.
I'll now shut up and give someone else a go.
Lettings Relief
Have been out of the country and have come back to try and catch up on this 'wonderful' new idea!
Am I correct in assuming that Lettings Relief (for the last 48 months of letting of a PPR) has not been withdrawn?
Lettings Relief????
Robert - surely you mean last 36 months as an extension of PPR?
Lettings relief is lower of £40,000 etc etc
OK....but!
Yeah, 36 month normally, but 48 months where duties of a UK employment require taxppayer to live elsewhere.
Either way, is Darling tinkering with this at all?
We seem to be getting a bit off topic here ...
... but I think you are confusing two different issues. The 4 year period in relation to the duties of an employment applies if there was a period of residence both before and after the period of absence. The exemption for the last 36 months applies regardless as long as the property was at some time the PPR. So if you were prevented from occupying as a result of an employment elsewhere in the UK and say you were away for three years, if you never resume residence the relief for an absence up to 4 years cannot apply but the relief for the last 36 months. If you did resume residence then both would apply i.e. they overlap.