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Tales from the phones

Here are some sample questions submitted by accountants to the ICPA/Vantage helpline

Question: I have heard a new capital allowance has been introduced in connection with buildings. Could you provide some more information please?

Answer: That is correct, a new allowance, Structure and Buildings Allowance (SBA) was introduced from 29 October 2018. This is designed to encourage investment in construction of new structures and buildings intended for commercial use.

It will allow relief on the relevant costs over 50 years at a flat rate of 2% of the qualifying costs and will be regardless of ownership. It will become increasingly important to retain records and will be another point to consider in the future on the purchase of buildings.

As well as being available for new buildings and structures, the relief will be available for costs on new conversions and renovations.

It is available in respect of expenditure under contracts where all of the contracts were entered into on or after 29 October 2018.

A claim will not be able to be made until the asset is actually brought into use for the qualifying activity.

Among other activities, a qualifying activity will be a trade, profession, vocation, UK or overseas property business or certain other undertakings qualified by statute. Residential property and other structures that function as dwellings are specifically excluded from relief. As ever, the new law is subject to other conditions and also anti avoidance rules. It is recommended that further advice is sought should you believe you may be in a position to claim or are considering incurring expenditure.

Question: Regarding inheritance tax reliefs, my client died and, at the time of death he had held shares in a limited company for three years. For two-and-a-half of those years the company was dormant, not undertaking any business whatsoever. I am looking at the rules for Business Property Relief and I see that the shares were held for at least the minimum period (two years), but I am concerned that the company did not trade throughout that period.

Answer: This raises an interesting point. As you state the asset was held for the requisite period, however, there is one further consideration. This requires that the company must have been in business for the two year period to death.

Strangely, it is not necessary that the business would, when considered alone, be a qualifying trade for Business Property Relief (BPR) for the two years. The qualifying business purpose must be in place at the time of transfer (in our case, death) and, provided there was some business throughout the two years to death, then the relief will be available.

For example, the company could have been running a property investment letting business for 18 months and then start trading for the final six months. In these circumstances, BPR would be due.

In our case, however, as the company was dormant during the period, there would be no business activity for the full two years and so the shares would not qualify for BPR. This view is supported by HMRC at IHTM25303.

Question: I understand that there have been some changes made regarding the qualifying conditions to obtain Entrepreneur’s Relief on the disposal of assets. Can you confirm the changes please?

Answer: Yes, there were two major changes in respect of the relief for disposals on or after 6 April 2019.

Firstly, the holding period of the asset was doubled from one year to two years for disposals caught by the changes. The second change is in connection with share disposals.

The previous rules required that the shares were in a trading company or holding company of a trading group and (other than for EMI shares, to which slightly different rules apply) the company must have been the individual’s personal company and the individual was an employee or officer throughout that (now two-year) period.

To qualify as a personal company the individual must hold at least 5% of the ordinary share capital and that that holding entitled them to at least 5% of the vote. This had been the case since the introduction of the relief.

The new condition is that the shareholding must entitle the holder to at least 5% of the profits and 5% of the assets available to equity shareholders in the event of the winding up of the company. Also, the shareholder must be entitled to at least 5% of the disposal proceeds in the event of the sale of the company.

• Thanks to Vantage for this article

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