HMRC have announced that 90 offices will close with the loss of 3400 jobs.

This is crazy situation , at present it is taking weeks even months to get errors, claims processed etc.We have a situation with officers being poorly trained in all aspects of taxation.The reduction in numbers can only go to provide an even poorer service with experienced officers leaving the HMRC.

Now don t get me wrong there is a considerable amount of time wasted on poor enquiry work which needs to be rectified but it is the enquiry system along with the hierarchy who need to change to correct these problems.The reduction can only result in less taxpayers being caught for tax irregularities!

 

 

It was generally considered and accepted by HMRC  that properties that complied with the legislation relating to furnished holiday lettings would generally qualify for 100% business property relief for inheritance tax purposes.

HMRC have updated their manuals suggesting that this approach may not be correct and therefore the properties do not qualify for relief.

The answer will  depend upon the level of services provided in running the property whether by the individual or agents that have been appointed to do the day to day running.No doubt there will be a commissioners case sooner or later as a test case to determine the question.

I note that a reputable firm of accountants is circulating a notice about the withdrawal of the local HMRC agreements with motor dealerships where employees benefits relating to the use of demonstators is averaged.

Of course their take on the scenario is that this is going to increase the value of the benefits and therefore the tax payable by the employees and almost designed to cause panic.

According to page 4 of HMRC new arrangements it states on page 4 that there is no intention to increase taxes but merely simplify the calculations.Whether this is correct is another fact and time will tell.

The new process shows:

Step 1- Identify cars to be averaged

Step 2- Separate cars into groups

Step 3-Calculate the average price of the notional car in each group

Step 4-Calculate the average CO2 emissions and appropriate percentage of the notional car in each group

Step 5- Determine the benefit charge for the notional car in ewach group

Step 6- Identify employees

Step 7- Allocate employees to each group

In reality all that is happening is the method is being set in stone rather than allowing individual HMRC offices to allow variations and is designed for consistency.

See the full notes on HMRC website

http://www.hmrc.gov.uk/cars/averaging.pdf

 

Housebuilders are havng a difficult time at the moment with having unsold houses in stock. One temporary solution may be to rent these houses to tenants but beware there is a VAT issue.

Sales of new houses are zero rated and the builder can make a full recovery of any input tax incurred.Rented properties are exempt for VAT purposes and therefore no input tax can be recovered.

So if we have a change of mind there is an issue with regard to input tax that has already been recovered with regard to the rental income.

HMRC have issued a very helpful notice giving details as to how the past recovery should be dealt with, this can be based on the expected sales price and rental income which may result in the past input tax falling into a de minimis claim with no clawback.Going forward the builder will fall into the partial exemption provisions and may not be able to fully recover future input tax.

Earlier this year a case was taken before the commissioners about new properties which were being built for resale.Due to various circumstances some properties were being rented out in the short term.The properties were however shown as stock on the companies balance sheet as the ultimate intention was to still sell them on when conditions changed.

One of the shareholders died and the question arose as to whether business property relief for inheritance tax was available .HMRCs view was that the rented properties were excepted assets and did not qualify.The executors case was that they were still stock and therefore part of the companies trading assets.

Evidence was produced about the companies intentions and it was held that the assets held in stock had not become investment assets and therefore the relief applied.

Clearly thr treatment in the accounts and the intentions of the company were highly relevant .

 

In 2002 the tax treatment of foreign exchange differences changed. From that date they fall within the loan relationship legislation and treated as either non trading or trading relationships.

Consider the case where a substantial asset was purchased from the EC in euros and financed by an hire purchase agreement in Euros.

In the accounts the purchase is treated as an asset and its value translated at the euro rate at date of invoice and the loan similarly dealt with.

The loan is restated at each year end based on the Euro exchange rate which in our case has resulted in an exchange loss over the last 12 months of £400,000.

Since this is a trading loan relationship the loss is treated as part of the trading profits and therefore is tax deductible. If an overall taxable loss had arisen this could be offset under the normal trading losses rules.

There would have been a slight difference if this had been a non trading relationship in terms of how the loss could be offset.