General Tax, Stamp Duty Land Tax, Value Added Tax
‘Give me your tired, your poor, your huddled masses yearning to breathe free.’
(New Colossus by Emma Lazarus inscribed on the Statue of Liberty)
When I revamped my website I was persuaded that it would a good idea to invite the tax-confused to contact me with their questions. There’s a lot of them out there. No wonder, if you ask me.
Now I’m a fully-fledged tax agony aunt so I thought I would dip into my virtual mailbag and share some of the queries I’ve had over the last eighteen months or so. My answers are not intended to be definitive. As a rule of thumb I won’t spend more than 15 minutes on a query. After all, I’m doing this for free. Some of the queries result in chargeable work although, so far, most don’t.
Here we go:
Q: I am purchasing a farmhouse with a self-contained annexe on the same title (but separate council tax) in joint names with my wife for £975,000. We were looking to claim multiple dwellings relief, but with the 3% increase in SDLT for additional residential properties, this does not look viable at this price.
Are we able to nominate one dwelling each as a primary residence (and each to pay council tax separately) to avoid the 3% additional rate on the second dwelling?
Also, with the council tax being separate, are we obliged to declare multiple dwellings and pay the higher rate on the second dwelling but with the relief applied?
A: Members of a married couple (unless they are separated in circumstances which are likely to become permanent) are treated as one unit for the purposes of the additional rate so what you suggest will not work.
The higher rate transaction must be declared on form SDLT1 by entering code 04 in Box 1. MDR is claimed by checking Box 9 to show that a relief is being claimed and then inserting Code 33.
There is a Government amendment (details here) being made to the draft legislation in the Finance Bill which will relieve the acquisition of certain types of annexes from the additional 3% charge. This may apply to your proposed transaction. The amendment will have effect from 1 April 2016 when passed.
Q: My wife owns a new purpose-built holiday home on a 999 year lease. The plot was purchased first for £70,000 (no VAT) and the holiday home was constructed later. The common areas, mainly landscaping and a car park, are maintained by the landlord. Gardening services are provided by an individual who is not VAT-registered. The landlord is seeking to recover its costs through the service charge and has added VAT at 20% to the gardening costs although it did not pay any VAT to the gardener.
Do we need to pay VAT to the landlord?
A: I cannot trace a building obligation in the lease – was there a separate contract dealing with this or was it self-build? If only land was purchased from the landlord, there is a good argument that the ongoing supplies made to your wife under the lease (i.e. the service charge costs which will include the gardener’s charges) should be exempt from VAT based on the decision in Jennings.
Q: I have recently received a sum in settlement of a claim from a previous job and certain shares I held. The action was for breach of contract. My shareholding would have qualified for entrepreneur’s relief (ER) at the point of sale of the business. I had not had the shares 12 months but my query is, if breach is meant to correct the wrong as if it had occurred could I make an argument to claim ER?
A: If you did not fulfil the ER conditions at the time you sold you will not be able to claim the relief. Your claim against your former employer should have included the loss of ER on the shares which you had to dispose of early because of their breach of contract. Without seeing the contract it is not possible to give a definitive answer but, in principle and by analogy with the decision in BTC v Gourley  AC 185, the loss of ER should have been taken into account. There is an explanation of the Gourley principle on HMRC’s website which you may find helpful. It’s here.
Q: The solicitor acting for a bare trust has put down the bare trustees as the vendors of the freehold subject to the bare trust on the SDLT1 form. I emailed him, suggesting that he had made a mistake by not putting the beneficial owners on the SDLT1 (and SDLT2) form. I got a very patronising reply.
Should the beneficial owners or the bare trustees be shown as the vendors on the SDLT forms?
A: The HMRC guidance on completing form SDLT1 has the following as a note to Question 54 (Purchaser (1) – surname or company name):
‘Where purchaser (1) is a bare trustee – a trustee with no independent authority acting on behalf of a beneficial owner, enter the beneficial owner’.
In my view the same applies to vendor(s) where there is a bare trust. This follows from paragraph 3 of Schedule 16 FA 2003 which provides that:
‘Where a person acquires a chargeable interest as bare trustee, this Part applies as if the interest were vested in, and the acts of the trustee in relation to it were the acts of, the person or persons for whom he is trustee.’
Q: I’ve spent so long trying to get through on the HMRC telephone helpline that I’ve fallen for the woman who kept me on hold. She obviously feels the same way as she kept telling me that my call was important to her. I can’t get her out of my mind, what should I do?
A: Have a cold shower and pull yourself together.
Yes, I made one up. No prizes for guessing which.
You can ask me a question here. Feel free, it’s free. Grab your 15 minutes now.
Tax lawyer specialising in business tax, SDLT and VAT