Business News
Tax Planning
Business Sale
We were approached to act for a software company that was selling its intellectual property to a much larger organisation for around £1.5 million. The problem was that the purchaser insisted upon buying the intellectual property itself rather than the company shares, so that the overall tax rate to be suffered on the transaction by the shareholders was 37% rather than 10%
We were able to identify and demonstrate to the taxman that in fact the intellectual property belonged to the shareholders and not to the company. Because they and not the company were selling this, they were able to benefit from a 10% tax rate, saving them some £400,000 in tax.
Business Reconstruction
We were approached by the accountant of an architect’s practice, operating as a limited company with two shareholders. The company also owned 50% of the premises from which the practice traded, along with another, outside, shareholder. One of the shareholders wished to begin a process of retiring from the practice, but to keep his interest in the property.
We were able to find a tax-efficient route to permit a 'de-merger' of the practice from the shareholding in the property company, so that the shareholder could achieve his objective without creating unwelcome tax costs in re-structuring the organisation. Advance Revenue clearance was obtained for the arrangements to give certainty as to the tax treatment of the arrangements.
Domicile ruling
The client had Polish parentage, but was born and had lived his whole life in the UK. His parents, who were Jewish, had fled the threat of German invasion in the late 1930s, leaving behind property and business interests in Poland. The client’s father died, leaving his unenforceable interests in the Polish assets to his son, who had meanwhile acquired a holiday home in Israel alongside his UK assets.
In the 1990s the client asserted his rights to the Polish property and sold it. We were able to establish the client as domiciled in Poland, on the grounds that he had no clear domicile of choice in either the UK or Israel. This enables the client to avoid UK tax on non-UK income and gains.
Employee benefits
We helped to create a series of around 40 share option schemes for a telecommunications company, operating on a highly tax-efficient basis to enable the existing shareholders and the option holders to realise gains at a 10% tax rate. We agreed the share valuation in advance with the Revenue to avoid any nasty tax surprises for the employees, and drafted the option agreements and all other relevant paperwork.
Inheritance tax planning
By judicious planning we were able to reduce the potential inheritance tax liability of a wealthy couple from over £1.5 million to nil, without wholesale lifetime gifts of assets.
Revenue & Customs enquiries
We were able to persuade the Revenue not to collect around £50,000 of tax from a client under the subcontractors’ tax deduction scheme on the basis that the subcontractors had themselves paid over the tax.
We were also able to convince the Revenue in a different case that a fireplace installer who they argued was an employee was in fact self-employed.
Property taxation
We were able to assist a couple selling their bed and breakfast property / main residence for a gain of several hundred thousand pounds to achieve a capital gains tax liability on disposal of around £2,000, by efficient use of available reliefs.
Self-employed status
We were approached by a company providing free newspaper distributors to fight a Revenue challenge to their self-employed status that would have bankrupted the company. After long negotiations we persuaded the Revenue to drop the case, and set the company up with proper self-employed contracts for the distributors and other employees, including newspaper vendors.
Later the Revenue challenged the vendors’ status, but we were able to satisfy them by reference to the contract and the facts of the working relationship that the vendors too were self-employed. In each case this saved the company £000s in PAYE and national insurance contributions.
Care homes and hotels
We act for many care homes and hotels in establishing claims for capital allowances on fixtures attached to buildings. For example, in a recent case we established expenditure of £275,000 for a client, generating a large tax repayment going back over a number of tax years.
VAT Tribunal and Tax Commissioners cases
We acted for a kitchen and bedroom company in a case where Customs argued that the services provided by self-employed fitters were in reality provided by the client, and should thus be subject to VAT. We instructed tax counsel, negotiated a large reduction in the VAT assessment and took statements from key witnesses. The client won the case, saving some £100,000 of VAT and winning costs from HM Revenue & Customs.