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Matthew Hutton MA, CTA (fellow), AIIT, TEP highlights a selection of business tax planning points from recent conferences.

TCGA 1992 s 169Q Election

Andrew Burgess emphasised that we must understand the risks associated with the election under TCGA 1992 s 169Q (Reorganisations: disapplication of s 127), to disregard TCGA 1992 s 127 (Equation of original shares and new holding). Section 127 operates on a share-for-share exchange on a company takeover, so the new shares take the base value of the old shares, and there is no disposal for CGT purposes of the old shares.

Where s 127 is disregarded, a disposal of the old shares is deemed to occur at the time of the takeover, allowing Entrepreneurs’ Relief to be claimed if the conditions apply. However, there may be no cash available to pay the CGT due on the residue of the gain. The new shares also acquire a base cost equal to the disposal value of the old shares, but those new shares may drop below that base value before disposal, leaving a loss arising in a later year which cannot be carded back.

Entrepreneurs’ Relief and Private Property

The disposal of a property held outside a company can only qualify for Entrepreneurs’ Relief if the owner also makes a material disposal of shares in that company, which would qualify for Entrepreneurs’ Relief on its own merits. The property must have been used by the company for its trade for at least one year ending with the disposal of shares or the date of cessation of the trade.

Andrew Burgess proposed that a material disposal of shares could be a gift of only one share [which HMRC have confirmed is their view: see MTR 12/08 Item 1.1]. The disposal of the property must be associated with a withdrawal from the business, but what constitutes a withdrawal is not defined in the legislation. There may be a delay between the material disposal of shares and the associated disposal of the property. HMRC have an opinion on how long this period can be to allow the disposal to qualify for Entrepreneurs’ Relief (Capital Gains Manual, para CG63995), but this opinion is not grounded in the legislation.

(Taxation 26.11.09 p534-535, article by Rebecca Cave of Taxwriter Ltd reporting TaxAid Conference Tax Planning for the Family Business on 30.10.09, quoting Andrew Burgess of Mercia Group Ltd)

Own Share Purchases: Securing Capital Treatment – The Contract/Completion Distinction

Individual vendor shareholders will generally prefer CGT treatment, with Entrepreneurs’ Relief being available in most cases. Company law requires payment for the repurchased shares to be made on completion, and there must also be sufficient distributable reserves. However, Peter Rayney stated that it may be possible for the shares to be repurchased under a single unconditional contract with multiple completion. HMRC accept that beneficial ownership of the shares is lost from the date of the contract This means that the ‘substantial reduction’ test (i.e., one of the conditions for CGT treatment) does not have to be satisfied. However, the vendor must not be able to receive dividends or exercise voting rights during the ‘completion period’.

(Busy Practitioner September/October 2009 p4 report by Mark McLaughlin on the ICAEW Tax Faculty Conference 2009 in Manchester on 15 September)

What is MTR?

MTR is a 90 minute monthly training course, held in London, Ipswich and Norwich – as well as a reference work. Each Issue records the most significant tax developments over a wide range of subjects (see below) during the previous month, containing 30 to 40 items. The aim is not necessarily to take the place of the journals, but rather to provide an easily digestible summary of them and, through the six-monthly Indexes, to build up, over the years, a useful reference work. 

The first aim, therefore, of MTR is to inform. The second and subsidiary aim is to provide a monthly forum for the discussion of issues that tend to come up in professional practice, largely, though not exclusively, prompted by specific items in MTR.

Who should come to MTR? Does it attract CPD?

MTR is designed not primarily for the person who spends 100% of his/her time on tax, but rather for the practitioner (whether private client or company/commercial) for whom tax issues form part of his/her practice. Attendance at MTR qualifies for 1.5 CPD hours for members of the Law Society, for 1.5 CPD points for accountants (if MTR is considered relevant to the delegate’s practice) and (subject to the individual’s self-certification) should also count towards training requirements for the CIOT. For STEP purposes, MTR qualifies for CPD in principle, on the grounds that at least 50% of the content is trust and estate related.  
 
What is the content of MTR?

The material is drawn from HMRC press releases, Tax Bulletins, VAT business briefs, case reports and articles in the professional press. Each item carries a reference as to source which can be followed up if necessary. 

The logic of the ordering of the 12 sections is as follows: first, Capital Taxation (viz 1. Capital Gains Tax, 2. Inheritance Tax and 3. Stamp Taxes). Second, Personal Tax (4. Personal Income Tax). Third, Business Related Matters (viz, 5. Business Tax, 6. Employment, 7. National Insurance and 8. VAT & Customs Duties). And fourth, Miscellaneous (viz 9. Compliance, 10. Administration, 11. European and International and 12. Residue). An annual binder is provided within the subscription cost.

Despite an inevitable element of selectivity, MTR aims to be catholic in its coverage – and this is reflected in the presentations where appropriate: there may well be NI, VAT or employment tax points of which the person advising mainly on estate planning (for example) should at least be aware. That said, the London sessions at least tend to focus, by majority request, on estate planning issues: it is possible that in future one of the sessions might be geared more to company/commercial matters. 

How is MTR circulated?

The Notes are emailed to each delegate in the week before the presentations (and thus can easily be circulated around the office), with a follow-up four or five pages of practical Points Arising during the various sessions (whether in London, Ipswich or Norwich).

When and where is MTR held?

The London meetings take place at the National Liberal Club, One Whitehall Place, London SW1, on either the first or second Tuesday of the month, generally in the David Lloyd George Room. There is a choice of four sessions: 9.00 - 10.30 (3 places available), 11.00 – 12.30 (6 places available), 1.00 – 2.30 (8 places available) and 4.00 – 5.30 (3 places available).

The Ipswich meetings take place generally on the first or second Wednesday of the month at the offices of Pretty’s solicitors 45 Elm Street, Ipswich 5.00 – 6.30pm (5 places available). 

The Norwich meetings take place at the Norfolk Club, Upper King Street, Norwich on the first or second Thursday of the month from 5.30 – 7.00pm (3 places available). 

Dates are fixed up to a year in advance and any one delegate from a firm can take up the firm’s place each month. Attendance is limited to no more than 30 delegates in London and 25 delegates in Ipswich and Norwich (to make for ease of round table discussion).  The cost in London is £60 plus VAT, and in Ipswich and Norwich £50 plus VAT (billed every six months in advance).

How do I find out more?

For further details, visit http://www.matthewhutton.co.uk/ on Conferences & Seminars and then Monthly Tax Review – or email Matthew on mhutton@paston.co.uk.

For those whose firms unable to make the monthly seminars but wishing to order MTR as 'Notes Only' (at £180 per annum for the 12 issues, invoiced six-monthly in advance), visit  our sister site, TaxBookShop.com: Monthly Tax Review Notes