The obituaries of the late Lord Braybrooke reported that the title was inherited by the 10th Baron’s third cousin twice removed, Richard Ralph Neville, rather than the eldest of Lord Braybrooke’s eight daughters.

The estate passes to Louise Newman under the terms of the 7th Baron’s will made before he died in 1941; she is the 7th Baron’s granddaughter.

Countess Mountbatten of Burma also died recently.  Her obituary reported that because Lord Louis Mountbatten had no male heirs, a special remainder had been granted by King George VI in 1946 to allow the title to pass through the female line for one generation.  Accordingly, Norton Knatchbull is now the third Earl Mountbatten of Burma.

These reports have reminded us to remind you that, titled or not, you need to ensure that your assets will pass to those whom you wish to benefit and this will not necessarily be the case unless you leave a valid will.

Although changes were made to the intestacy rules in 2014, it is not necessarily the case that a surviving spouse or civil partner will automatically inherit everything and a cohabiting partner would not necessarily receive anything.

The rules about the Royal Succession were recently changed such that had Charlotte been born before George, she would be the monarch in preference to him (not that any of them want to be, according to Prince Harry).

For more details on matters of succession or a discussion of the relative merits of Poldark v Downton, please get in touch with your usual contact partner or use our enquiry form.

The post T’int right, T’int fair, T’int proper! The importance of a valid will appeared first on BKL.

The return for the year to 31 March 2018 and any tax due for the year must both be dealt with by 30 April 2017. The amount of the tax charge depends on the value of the property and now ranges from £3,500 up to a maximum of £220,350 across six bands of value determined by reference to a property’s value on 1 April 2012 or its actual cost if acquired after that date.

There are a number of exemptions from the charge covering property rental businesses, developers, and dealers which must be claimed via an annual “nil return”.  Failure to submit such a claim in good time will unfortunately expose the company to penalties.

HMRC is introducing a new online ATED filing service with effect from 1 April 2017 which will become compulsory for the filing of 2018/19 returns in April 2018. This involves a registration process, which we can assist with, and does allow for the appointment of an agent to file on behalf of a company.

Looking ahead, a revaluation exercise will also be required next year when the ATED charges will be rebased to 1 April 2017 values.

We understand that property values are particularly volatile post-Brexit (you knew it would get a mention somewhere) and that some valuers are advising that there may be instances where values might actually fall when this exercise is undertaken. It is suggested therefore that any valuation exercise is delayed until at least July when valuers can expect to have a more accurate picture of movements in the property market in the early part of 2017.

For assistance and guidance on ATED returns or planning, please get in touch with your usual BKL contact or use our enquiry form.

The post The Annual Tax on Enveloped Dwellings 2017/18: action required! appeared first on BKL.

Why are we telling you this?  Because it reminds us to remind you of the inheritance tax (“IHT”) consequences of such a move.  The point is this: unlike shares quoted on the main market, shares listed on AIM have the potential to qualify for 100% IHT Business Property Relief once they have been owned for two years; on death this is as good as an exemption.  To be clear – this is not to say that all AIM-listed shares automatically qualify – the company must also meet the requirement that it is a trading company: the point is that AIM shares at least have the potential to qualify.  But once a company moves from AIM to the main market the relief is instantly lost.

Furthermore, the rules on “replacement property” provide that if BPR assets are sold and the proceeds reinvested in other BPR assets the two-year ownership period is carried over: you don’t have to wait a further two years before the replacement assets qualify.  By contrast, if you wait until the shares have lost their BPR status before selling and reinvesting into BPR assets, the two-year clock is re-set to zero.  So the moral is that when a company moves from AIM to the main market, there are IHT advantages in selling and reinvesting before the date of the main market listing.

This is, of course, “tax” and not “investment” advice.  We have no tips on the future prospects of Sirius Minerals or any other company.  And even if we did, we wouldn’t share them.

For even more serious advice, please get in touch with your usual BKL contact or use our enquiry form.

The post Let’s get Sirius appeared first on BKL.

Tax was probably about as far from the thoughts of Mr and Mrs Owens as it’s possible to get.  But the case got us thinking about the treatment of married couples, especially as regards CGT.   In particular, the “no-gain no-loss” rule on inter-spouse transfers continues to apply to a married couple (and, it goes without saying, to partners in a civil partnership) unless

• they are separated under a court order or
• they are separated by deed of separation or
• they are in fact separated in circumstances likely to be permanent.

And (in any case) the special rule continues to apply until the end of the tax year in which the separation occurs – which may be why so few couples apparently separate towards the end of March and so many apparently stick it out until after 5 April.

Having read the case, we would say with some confidence that Mr and Mrs Owens are now separated in circumstances likely to be permanent.  However they (and other separated but non-divorced couples) will need to bear in mind that they remain “connected persons” until any divorce becomes absolute.  This means the special tax rules governing transactions between connected persons apply.  In particular:

• all transactions between them are conclusively deemed to have been non-arm’s-length transactions such that market value must be applied for tax purposes and
• any CGT loss which arises on a disposal made by one to the other is a “clogged” loss, use of which is severely restricted

For more on this and on the many other tax issues which may arise on marriage breakdown you may wish to refer to our webinar: Tax aspects of relationship breakdown. (But please bear in mind that it reflects the law and practice at the time the webinar was produced in 2015.)

Alternatively, please get in touch with your usual BKL contact or use our enquiry form.

The post Owens v Owens: CGT on divorce appeared first on BKL.

In enquiring into his 2013/14 tax return in December 2015, HMRC asked some questions about his domicile status, which was relevant to his liabilities to Income Tax, CGT or both.  Specifically the questions were directed at two points in particular.  First, whether Mr Gulliver (whose domicile of origin was agreed to be in the UK) had ever acquired a domicile of choice in Hong Kong; and if so, whether he had subsequently abandoned that domicile of choice such that his UK domicile revived.

The question of Mr Gulliver’s domicile had come up before.  In 2002 he had made a transfer to a trust in circumstances that a small amount of IHT liability would have arisen if (and only if) he had been of UK domicile at that time.  HMRC had confirmed in 2002 that no such liability arose and therefore by clear implication that Mr Gulliver was not of UK domicile at that time.

Thus when the 2015 enquiry was made, it was contended on behalf of Mr Gulliver that HMRC had previously determined that he had acquired a domicile of choice in Hong Kong and that they were “stuck with the consequences of that determination.”  The contention was not, of course, that having made that determination HMRC were bound for ever afterwards to treat Mr Gulliver as domiciled in Hong Kong.  That would clearly have been ridiculous.  The contention was more subtle.  It was that HMRC were not, in 2015, entitled to investigate whether Mr Gulliver had acquired a domicile of choice in Hong Kong (for that had already been determined in 2002).  Thus any enquiry in 2015 could be directed only at whether that domicile of choice had subsequently been abandoned – for which, crucially, the burden of proof would fall on HMRC and not on Mr Gulliver.

Mr Gulliver lost.  As the Tribunal said – “Income Tax and CGT are charged by reference to separate tax years.  A determination of fact made in relation to one tax year is not binding in relation to another tax year.  Both HMRC and a taxpayer are permitted to make arguments that call into question factual determinations made in respect of a different tax year”.

The principle is not limited to determinations of domicile status, but is much wider.  In principle, for example, an activity can be agreed to amount to trading in one year and the same activity to be non-trading in another year.  A property may be held as a matter of fact to be your main residence in one year and, on the same underlying facts, not to be your main residence in another year.  Fortunately, in practice it is relatively uncommon for HMRC, having investigated the factual position in one year, to be inclined to re-visit the matter in a subsequent year unless the underlying facts have changed.  But it is as well to be reminded that, strictly, a decision or agreement on facts has “all too short a date” as the Bard might have put it.

For more information, please get in touch with your usual BKL contact or use our enquiry form.

The post Gulliver’s Travel: reliance on domicile (and other) determinations appeared first on BKL.

Suppose, for example, that Tom and Harriet are the joint inheritors of their widowed mother’s estate which totals £3m.  In the normal run of things the estate will pay tax of £940,000 (assuming a “doubled-up” nil rate band to be available) and the beneficiaries will each receive £1,030,000.  They could, however, jointly agree to vary the disposition of the estate and give a minimum of 10% of the chargeable estate (so £235,000) to charity – perhaps a charitable trust set up in memory of their late parents.  This would reduce the tax on the remainder of the estate to £761,400 so that Tom and Harriet would each receive £1,001,800.  Bestowing a benefit of £235,000 on the charitable trust would thus have cost each of them just £28,200 – effectively giving tax relief at the rate of 76%.  Or, to put it another way, the government tops up each £1 given by Tom and Harriet with a further £3.16.  Subsidy of this kind may be a compelling reason to consider generosity to charity at a time of bereavement.

For more on wills, estates and variations, please get in touch with your usual BKL contact or use our enquiry form.

The post Gifts in memoriam appeared first on BKL.

However, the point of interest in the case is that the appeal nonetheless succeeded.

The company had (through its solicitors) exercised its right to have its appeal against the penalty “reviewed” by Revenue Scotland (the body with deals with LBTT).  The legislation required Revenue Scotland to “notify the appellant” of the conclusions of the review. Revenue Scotland had notified the solicitors but had not notified the company itself.  RS argued that telling the solicitors, as appointed agent and the people who had actually sought the review, was good enough.  The Tribunal disagreed: “notify the appellant” means “notify the appellant”.

The legislation does not specify the consequences of a failure on the part of RS to notify the appellant of the conclusion of its review of an appeal.  Indeed, it recognises the possibility that this might happen by expressly providing that if no conclusion is notified, the appeal can be referred to the Tribunal in the same way as if RS notify their conclusion that their decision is to be upheld.  Nonetheless the Tribunal in the Classic case decided that “the failure to follow statutory provision vitiates all subsequent procedure…Classic should have met its statutory obligations by filing its tax return on time but RS has not followed its statutory obligations either and so the penalty cannot be enforced.”

Care should be taken in applying the decision.  The point seems to have been one raised by the Tribunal of its own volition.  We think there is considerable doubt as to whether the Tribunal decision was correct and even if it is, it is not binding on other First-tier Tribunals.  The interest in the case is that, especially in hard cases, a sympathetic Tribunal may be willing to find procedural ways to arrive at the “right” answer and it is always worth checking out the procedural niceties.

The post Classic error: penalty procedure appeared first on BKL.