Company Tax Investigation Archives - HMRC Tax Investigation Specialists https://www.hmrcinvestigations.co.uk/category/company-tax-investigation/ Tax Accountants and Tax Investigations Specialists Tue, 08 Oct 2019 09:17:08 +0000 en-GB hourly 1 https://wordpress.org/?v=6.8.2 https://www.hmrcinvestigations.co.uk/wp-content/uploads/2019/05/cropped-153267790195125426.v1.cropped-32x32.png Company Tax Investigation Archives - HMRC Tax Investigation Specialists https://www.hmrcinvestigations.co.uk/category/company-tax-investigation/ 32 32 HMRC Inquiry Closure Notice Application | CASE LAW https://www.hmrcinvestigations.co.uk/hmrc-inquiry-closure-notice-application-case-law/ Fri, 04 Oct 2019 11:51:19 +0000 https://www.hmrcinvestigations.co.uk/?p=666 The post HMRC Inquiry Closure Notice Application | CASE LAW appeared first on HMRC Tax Investigation Specialists.

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An application for a closure notice in respect of an HMRC inquiry into the appellant’s domicile status was refused, as HMRC was not bound by its previous confirmation of the taxpayer’s domicile.

The appellant, a UK national with a UK domicile of origin, spent significant amounts of time living in the Far East. In December 2015, HM Revenue and Customs (HMRC) opened an inquiry into the appellant’s tax return for 2013/14. The appellant’s domicile status was the only material point outstanding.

In October 2002, the appellant’s advisers had written to HMRC explaining that, in September 2002, the appellant transferred £273,677 (from funds held outside the UK) to a discretionary trust. This sum was above the inheritance tax (IHT) nil rate band, and the contribution would, therefore,  have  given  rise  to   an  IHT  liability  of some

£4,735 if the appellant was UK domiciled at any time in the three years up to the transfer.

The advisers explained why in their view the appellant was domiciled in Hong Kong. Following further correspondence, HMRC confirmed in March 2003 that the transfer did not attract IHT. In doing so, HMRC was accepting that the appellant had acquired a domicile of choice in Hong Kong.

At the time of the correspondence with HMRC in 2002, it was expected that the appellant would stay in the UK for two years, whereupon he would return to Hong Kong. However, events turned out differently, and the appellant was resident in the UK for tax purposes for 13 years.

The appellant applied to the First-tier Tribunal (FTT) for a direction that HMRC issue an enquiry closure notice for 2013/14 within a specified period, as  (among  other things) HMRC had previously determined that the appellant acquired a domicile of choice  in  Hong Kong, and were effectively ‘stuck with’  the  consequences  of that   determination.

However, the FTT disagreed. Income tax and capital gains tax are charged by reference to separate tax years. A determination of fact made in relation to one tax year was not binding in relation to a later tax year. Even if, in 2003, a court or tribunal had decided that the appellant had a Hong Kong domicile of choice or HMRC and the appellant reached an agreement under TMA 1970, s 54 to this effect, there was no impediment to HMRC arguing, in proceedings relating to the tax year 2013/14 tax year, that the appellant never acquired a Hong Kong domicile of choice: The appellant’s application was refused.

Gulliver v Revenue and Customs [2017] UKFTT 222 (TC)

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]]> Disincorporation relief – claim it while you can https://www.hmrcinvestigations.co.uk/disincorporation-relief-claim-it-while-you-can/ Fri, 10 May 2019 11:22:57 +0000 https://www.hmrcinvestigations.co.uk/?p=1 The post Disincorporation relief – claim it while you can appeared first on HMRC Tax Investigation Specialists.

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Changes to the taxation of dividends have reduced the tax advantages associated with operating as a company. Add into the mix the additional burdens imposed on companies – such as the need to file accounts and an annual confirmation statement at Companies House – and it is easy to see why the question of whether it would now be better to operate as an unincorporated business may arise. However, while it is relatively easy to incorporate a business and reliefs are available to smooth the way, going from a company to an unincorporated business is less straightforward, and may trigger unwanted tax charges.

Enter disincorporation relief

Disincorporation relief allows a company to transfer certain types of assets to its shareholders who continue to operate the business in an unincorporated form, without the company incurring a corporation tax charge on the disposal of the assets.

Without the benefit of the relief, transferring assets to shareholders may trigger a corporation tax charge. A transfer between a company and its shareholders is one between connected persons, and as such, the transfer is deemed to be at market value, regardless of the actual money, if any, which changes hands. If the market value is more than the original cost or tax written down value, this will trigger a corporation tax charge.

Disincorporation relief essentially delays the charge and passes it to the shareholders, who agree to use the transfer value as the cost of working out any gain on a subsequent disposal of the asset.

Eligibility

Disincorporation relief is only available where:

  • the company transfers its business to some or all of its shareholders;
  • the transfer is a `qualifying transfer’; and
  • the transfer date is on or after 1 April 2013 and on or before 31 March 2018.

The business must be transferred to individuals or to individuals who are in partnership (but not to a limited liability partnership), and they must continue to run the business afterward. The relief must be claimed jointly by the company and its shareholders.

Qualifying transfer

The relief is only available for a qualifying transfer. This is a transfer where all the following conditions are met:

  • the business is transferred as a going concern;
  • the business is transferred together with all the assets of the business, or together with all the assets of the business apart from cash;
  • the total market value of the business at the time of the transfer is £100,000 or less;
  • the shareholders to whom the business is transferred are individuals (including individuals in partnership); and
  • the shareholders holding shares in the company throughout the 12 months before the transfer.

Qualifying assets are an interest in land (other than land held as trading stock) and goodwill (though an adjustment may apply if the goodwill relates to a business started on or after 1 April 2002 or acquired from an unrelated third party on or after that date).

Final curtain

At its introduction, disincorporation relief only applied to transfers occurring within a five-year window – 1 April 2013 to 31 March 2018. It was announced at the time of the Autumn 2017 Budget that the end-date will not be extended, and as such disincorporation relief will not be available for transfers after 31 March 2013. The transfer date is normally the date that the business is transferred but may be a different date for a disposal under contract.

Where the intention is to disincorporate, the clock is running on the availability of disincorporation relief.

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