CAAV Tax Tutorial July 2011

CAAV Staffordshire Taxation Update Rodbaston College Charles Cowap 27 July 2011 http://www.slideshare.net/cdcowap

Today:
Budget 2011
Business Travel
SDLT
Capital Allowances
FHLs
Farmhouses
http://www.hmrc.gov.uk/budget2011w.pdf

2012-13
Personal Allowance to become £8,105
Higher Rate Threshold to become £34,370

Bulk Purchase Rules to change (Residential) Price averaged Min 1% rate

Business Travel
Approved Mileage Rate up to 45p/mile from April 2011 (was 40p)
First 10,000 miles
No change above 10,000, stays at 25p
Employer pays less than 45p?
Claim Mileage Allowance Relief on shortfall

Capital Allowances

Effects
Severe reduction of Annual Investment Allowance (down to £25,000 from £100,000) wef 2012
WDA also down by 2% wef 2012
But Good News:
Extension of Short Life Asset treatment from 4 to 8 years

Short Life Asset
Previously restricted to 4 yrs, now 8 yrs
Treatment
Treated separately from ‘pool’
Ordinary claims at 20% pa during ownership
Sell for LESS than balance  claim difference
Sell for MORE than balance  pay balancing charge
After 4 yrs/8 yrs, if not sold then transferred to general pool of P&M

£100,000 machine
Balance after 4 yrs @ 20% pa = £41,000
Balance after 8 yrs @ 20% pa = £17,000
So sell Yr 4 for £30,000, claim £11,000 balancing allowance
New approach extends availability to 8 yrs
See: http://bit.ly/lQ6K9n for more

Furnished Holiday Lettings
What was good for tax:
Claim Capital Allowances
Claim Loss Relief
Rollover Relief from CGT
Holdover Relief from CGT
Entrepreneurs’ Relief from CGT
Pension relief
Business Asset for IHT
Looked as if we were going to lose this ….

FHLs: the changes
Was
UK
Commercial, view to profit
Longer lettings no more than 155 days pa
No single let more than 31 days
Available for holiday letting 140 days
Actually let 70 days
Will be
UK and EEA
Same
?
Available for 210 days from April 2012
105 days from 4.12
Losses restricted to FHLs

Farmhouses …
Rachel Dixon and her Westmorland Damsons
The Rosser’s retirement home
Mr Higginson’s Irish shooting lodge
Rosemary Antrobus Cookhill Priority (I & II)
Sir Reginald McKenna, Rosteague House

Mr Farmer and his diversified farm
Ragley Hall’s business
Mrs McKenna’s Conacre Field
Brander (or Balfour), a Scottish business
Mr Atkinson’s partners in Lancashire
Mr Golding’s very small smallholding
http://bit.ly/n0Gdjq

Implications for Professional Practice and Instructions?

Market Valuation: s160, Red Book
Define Agricultural Property: s115
Land to which buildings and woods are ancillary
Tenure considerations
Define farmhouses, cottages, farm buildings (s115)

Advise on ‘character appropriate’ (s115)
Size, content and layout considering AREA of land
Size, content and layout considering FARMING ACTIVITIES
Elephant Test?!
House with land, or a farm?
History
NB Retirement Homes!

Opinion/evidence on satisfaction of occupation requirements: 2 years/7 years before death (s117)
Full Valuation Report: Valuation and Report for Inheritance Tax Purposes (but NOT a probate valuation)

Value this farm for IHT
5 bedroom farmhouse
3 cottages, 2 occupied by farmworkers, 1 let on AST
200 ha: 50 ha Grade 2, 140 ha Grade 3, 4 ha yards and waste, 6 ha Grade 4
200 dairy cows, followers, 80 ha arable
Ice cream business: 500 000 l pa @ £1/l
5 000 sq m of ‘modern’ farm buildings
500 sq m office conversion, fully let
500 sq m with pp for holiday conversion

Contact Details
In-house CPD programmes, professional-technical updates, organisational consultancy, and more:
 [email_address]
01952 815305
 07947 706505
Twitter: @charlescowap
Blog: http://charlescowap.wordpress.com/

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CAAV Tax Tutorial July 2011

by Charles Cowap

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