CGT chattels exemption on watches?

A client bought a watch some years ago for £5,000 and it is now worth in the region of £25,000. Will the chattels exemption from capital gains tax apply to a disposal?

The chattels exemption can apply to disposals of tangible moveable property for £6,000 or less. If the consideration exceeds £6,000 the chargeable gain is restricted to five-thirds of the excess. These rules will not assist the client.

However, a gain from tangible moveable property which is a wasting asset is completely exempt from capital gains tax irrespective of the level of sales consideration. Plant and machinery is a wasting asset and HMRC accept that a watch is classified as machinery so your client’s capital gain will be completely exempt. This does of course assume the disposal is in fact a capital disposal and your client is not carrying on trading activities.

Non-Resident Landlords and VAT…

We have a number of clients who are non-resident, but are required to complete a UK tax return as they have UK property letting income.  They incur VAT on property management fess, so should we charge VAT on their accountancy fees?

Services of a professional nature provided to a non-EC resident are deemed to be supplied where the recipient belongs (paragraph 16(2) Schedule 4A VAT Act 1994). As such the services are treated as outside the scope of UK VAT, as the rental property itself does not create a place of belonging for the owner. So no VAT should be charged.

This is in contrast to services which are directly related to land (paragraph 1(1) Schedule 4A) such as those of a property managing agent. Here the place of supply is deemed to be where the specific land or property is situated, hence your clients are correctly charged VAT.

The situation is slightly less clear for professional services supplied to an EC resident with UK property rental income. This particular scenario is not directly clarified in HMRC’s published guidance, however, we would argue that as property letting is a business activity for VAT purposes, the services should be treated as business to business under the general rule and therefore supplied in the Member State where the landlord belongs and outside the scope of UK VAT.

Dis-incorporation relief on family land and companies…

An individual is about to sell some land which was used by their family company in which they own 50% of the shares and they intends to roll-over the gain into replacement assets.  The family shareholders also want to wind up the company and continue to trade through a family LLP.  The company’s own buildings and goodwill are valued at less than £100,000, but is the value of the land also taken into account when deciding if dis-incorporation relief is available?

No, you only need to consider the value of the assets owned by the company. But have you considered the roll-over relief implications? Gains arising on the disposal of personally owned assets used in the trade of his family company may only be rolled over into the cost of replacement assets to be used by the same company. So if the company is wound up before replacement assets are acquired then there will be no entitlement to roll-over relief.

Employment Law – Whether the weather has an effect…

Extreme weather conditions of various types e.g. snow, rain, wind can affect the normal running of operations. Employee absence and pay for time away from work is the most common issue so, here, we take a look at employers’ legal position.

Employee Cannot Get To Work

Employees may not be able to get to work for a number of reasons connected with the weather, for example, roads are closed or public transport has been cancelled.

Unless the employee has agreed with you in advance that the time will be covered by, for example, annual leave, then the usual position is that the employee receives no pay for the time they are absent due to bad weather.

This is the case even though circumstances are beyond the employee’s control. It is the employee’s responsibility to get to work on time and there is no reason to treat lateness/absence for bad weather differently than normal lateness/absence. You can, naturally, show more leniency at your discretion if you wish but you should be consistent across all employees.

Alternatives To Maintain Payment

You may choose to agree that any absence is covered under a different heading, for example:

  • Agreeing a short notice annual leave request.
  • Agreeing that banked lieu hours are used.
  • Agreeing that the employee works from home if facilities will allow.
  • Enforcing annual leave on an employee, however, there are specific notice requirements attached to this and therefore it is not practicable for a small number of days’ absence.

If The Workplace Cannot Open

If the workplace is not able to open because of bad weather, the situation is different.

Your employees will be entitled to full pay provided that they themselves are able to or would be able to get to the workplace.

However, a contractual right to lay off means that you will be able to place employees on lay off i.e. provide no work for them and this will be unpaid.

Employees on layoff who have at least one month’s service are entitled to receive Statutory Guarantee Pay (SGP) for a maximum of one working week per 3-month period. The current rate of SGP is £26 per day or the employee’s normal daily rate if that is lower.

Contracts of employment may include the express right to lay off but if they do not, it is worth attempting to agree lay off with employees at the time.

Reducing pay to nil where there is no agreed layoff provision will entitle employees to make a claim to Employment Tribunal for an unlawful deduction.

You should keep in touch with employees on layoff to keep them updated on when work may become available again.

Time off for dependants

Although your workplace may remain open and transport links are operational, some employees may be absent from work because their child’s school/nursery has had to close

Employees have a right to a reasonable amount of time off for dependants in an emergency situation where normal care arrangements break down. This is without pay.

One or two days is normally sufficient to cope with the emergency status of the breakdown in arrangements and you should seek to agree how any longer amount of time off will be treated e.g. annual leave.

Stamp duty on siblings first home?

A parent intends to help their daughter buy her first home by taking a 25% stake in the property. He will continue to live in his current main residence. Will the higher rates of stamp duty land tax for additional residential properties apply?

Yes. When a property is acquired by joint owners the higher rates apply if the transaction would have been a higher rates transaction for any of the joint purchasers considered individually. Your client is buying an interest in an additional residential property which is not replacing his main residence so the higher rates will apply to the whole transaction.