Two (or possibly more) individuals might together buy (say) a house. If one of those individuals disposes of their interest in the house to a third party or dies, how should that property interest be valued for inheritance tax (IHT) purposes? Why it matters The jointly-owned house could be held either as ‘joint tenants’ or… Read More »
Individual shareholders selling their shares back to the company normally prefer the proceeds from the share disposal to be treated as a capital receipt, where possible. This is because the capital gains tax (CGT) rate is 10% if business asset disposal relief is available, or 20% in most other cases. Income or capital gain? However,… Read More »
Most tax advisers use the guidance manuals published by HM Revenue and Customs (HMRC) on a regular basis. Taxpayers may sometimes refer to them as well. It might be tempting to go straight to the HMRC manuals for guidance on a tax issue, without looking at the relevant tax legislation. This would be a mistake… Read More »
Individual owners of buy-to-let rental properties generally assume there are no National Insurance contributions (NICs) to pay on their rental profits (as there is for self-employed individuals carrying on a trade). Class 4 NICs Self-employed individuals are generally liable to Class 4 NICs on net profits chargeable to income tax as trading income (and which… Read More »
An individual might occupy a dwelling for only a short period of time before selling it. They will normally hope to be entitled to principal private residence (PPR) relief for capital gains tax purposes in respect of a gain on disposal. However, a common question in such circumstances is: ‘how long does an individual need… Read More »
Enquiries and checks by HM Revenue and Customs (HMRC) into the tax position of family and owner-managed companies often involve a review of loan accounts of the director shareholders (often referred to as ‘directors’ loan accounts’ (DLAs)). This is particularly the case if DLAs are (or have been) overdrawn during the period under review. What… Read More »
Business asset disposal relief (BADR; previously known as entrepreneurs’ relief (ER)) is a valuable and much sought-after capital gains tax relief. However, the conditions for claiming the relief are often problematic. Jumping hurdles For an individual shareholder disposing of shares in a company, the most common condition for relief is that throughout a two-year period… Read More »
For married couples (or civil partners), when one spouse dies their estate is administered in accordance with their will (if valid), or under the law of intestacy. Any inheritance tax (IHT) liability will be calculated accordingly. Simultaneous deaths What happens if both spouses died in circumstances where it is not known which of them passed… Read More »
Parents sometimes wish to gift income-bearing assets (e.g. company shares) directly to their unmarried minor children, to take advantage of the child’s personal allowance (and dividend allowance) and possibly also their basic rate income tax band, to reduce the family’s overall tax burden on dividend payments. Unfortunately, this tax planning idea is generally blocked by… Read More »
Many company owners hope to claim business asset disposal relief (BADR) (formerly known as entrepreneurs’ relief) on an eventual sale of their shares, to benefit from the special capital gains tax rate of only 10%. The small print In most cases, the BADR provisions on a share disposal require that certain conditions are satisfied for… Read More »