In the case of Malde v HMRC the First-tier Tribunal dismissed the Appellant’s appeal against HMRCs refusal to allow input tax to be reclaimed in relation to legal fees incurred by a sole trader where the input tax the individual had incurred in dealing with a freezing order related to the issue of personal liability notices. The input tax was for legal fees and HMRC said that the VAT that had been reclaimed had nothing to do with the supplies the sole trader usually made in the course of his business. This is a lesson for all those that trade in their own name that the input tax you recover on your VAT returns must relate to the supplies that you make and upon which you declare output tax.
This case was an HMRC application for permission to appeal to the Upper Tribunal in a case where they had initially lost in the First-tier Tribunal on the matter of whether Discovery Assessments issued under TMA 1970 S.29 when they had argued that the concept of “staleness” could not render an assessment invalid. Having lost in the initial hearing HMRC were refused permission to appeal.
In the case of R (on the application of Cartref Care Home)  an application was made for a Judicial Review to quash Partnership Follower Notices and Loan Charge Notices on the basis they were not compatible with the Human Rights Act 1998. The application was dismissed, but as HMRC seek to deal with the loan charge issue, it is likely that this type of court case will occur quite regularly.
Claim for overpaid inheritance tax due to fall in stock market or property prices
a. Drop in property prices following death
If someone passes away leaving behind properties, the inheritance tax is normally payable on the market value of the properties within six months after the date of death. If the property prices have fallen since the date of death, and the properties are sold by the beneficiaries at a loss within three years following the date of death, then a relief/ refund for any excess inheritance tax paid can be claimed. HMRC require the claim to be made within within four year of the end of the four year period during which the sale was made. Specialist advice should be taken before a claim for refund is made as the relief may be restricted.
b. Drop in stock market prices
If someone passes away leaving behind shares in the stock market, the inheritance tax is normally payable on the market value of the shares is normally payable within six months after the date of death. If the share prices have fallen since the date of death, and the share are sold by the beneficiaries at a loss within 12 months following the date of death, then a relief/ refund for any excess inheritance tax paid can be claimed. HMRC require the claim to be made within within four years of the end of the four year period during which the sale was made. Specialist advice should be taken before a claim for refund is made as the relief may be restricted.
Review of family assets and wills by a tax specialist
It is important to carry out an urgent review of the family assets including properties, shares, savings etc and the wills of the main heads of the of the family that own the assets. Whilst it is common to have a mirror will in place, this could be a time bomb for when the surviving spouse passes away and result in a much larger tax liability. This can be avoided as there are more effective tax planning structures available that could be applied to mitigate the overall tax liability of the family. Please contact us if you would like a tax specialist to review your family’s assets and advise on the best possible tax planning strategy that is tailored to your personal circumstances.
Deed of Variation
Where someone has passed away recently leaving behind some assets and there is inheritance tax payable. If the deceased left a will, it is worthwhile speaking to a tax specialist and check if there are any options for mitigating the inheritance tax payable through a Deed of Variation of the will. In our experience, the Deed of Variation if applied correctly can save significant amounts of inheritance tax. Please contact us if you have recently lost a loved one and wish for us to consider any tax mitigation options through a Deed of Variation.
Bereaved Minors Trust
A Bereaved Minors Trust (BMT) can be set up in a will where if a parent dies leaving behind minor children (under the age of 18 years). The benefit of the BMT is that the assets are taken by the Bereaved Minors Trust and there is no inheritance tax payable by the deceased’s estate. The assets need to be transferred to the children when they reach the age of 18 years. Until then, the income or capital of the trust can be used for maintenance of the children. Please contact us if you are worried about leaving behind young children and would like advice on setting up a Bereaved Minors Trust as part of your will
This client came to us from Derbyshire and was already under a tax investigation for failing to disclose income. We considered the merits of the case and suggested that a full disclosure under Contractual Disclosure Facility (CDF) would be the most effective way to conclude matters in contrast to a lengthy exchange of correspondence with HMRC inspector resulting in tax and high professional fees. The proposal was put forward to HMRC inspectors and they agreed to receiving a CDF. A full CDF submission was prepared and submitted which was fully accepted by HMRC. The tax and penalties payable as a result were quite minimal compared to what had initially been estimated. We are grateful to HMRC officers involved for their cooperation and support. Please click here to view HMRC’s acceptance of the CDF and conclusion of the matter.
Our analysis: This was an interesting case where our firm and HMRC worked in cooperation to bring an early and effective closure to a tax investigation. Had the conventional route of entering into prolonged correspondence and dispute been entered, this would have taken significantly longer and cost the client more in professional costs, tax and penalties etc. Although the CDF route may not be applicable in all circumstances but it is very useful to be able to identify the right strategy when approaching a tax investigation.