Tax Services Case Studies
1) Scheduling in Sheds
Client Profile
Type: Owner managed business
Sector: Transport storage and land ownership
Background: A well respected practitioner had acted for this business for many years when the owners discovered that several hundred acres of their land, most of which was not used for business purposes, could be designated for use under the County plan for the development of distribution sites. With potential gains running into the 10’s of millions, the object was to minimise initially any CGT and/or VAT that could arise and to consider the future from an IHT point of view.
Solution: MAS reviewed the ownership and operation of the land and advised upon a restructuring of the client’s affairs long in advance of the County plan being agreed thus minimising any immediate taxes. The client has now been structured so that as the value accrues, any gains are mitigated. In the longer term, the land is now held in various trusts which should allow easier succession.
Outcome: When the owners are ready, they can start marketing the land with its new planning potential in the knowledge that CGT will be at a maximum of 10% (likely to be considerably less) and know that it will be possible to pass this wealth to the next generation largely intact.
2) Parent Protection
Client Profile
Type: Professional firm
Sector: Legal
Background: A firm had acted for nearly 35 years for a solicitor client in the Midlands. The solicitor was approaching retirement age and had a clear succession plan in place for his practice. The practice was considering setting up an outsourcing venture in a “low wage” part of the world. The solicitor had amassed a valuable property portfolio both here and abroad of both commercial and residential property.
Solution: MAS ascertained that the solicitor was non-UK domiciled. However, he had been in the UK for many more than 17 years so had a UK deemed domicile for IHT purposes. His country of origin had an excellent double tax treaty with the UK. Accordingly, it made sense for the solicitor to move out of the UK, head the outsourcing project and relinquish his connections in the UK. An orderly plan to realise the property portfolio could then be undertaken with reinvestment happening tax efficiently.
Outcome: Within a couple of years, the solicitor should be able to realise his UK property portfolio with a reduced tax bill and place the funds where they are outside the scope of UK IHT. The result will be a saving in the region of over £1 million in IHT.
3) A Risky Business
Client Profile
Type: Accountancy Practice
Sector: Themselves
Background: A number of years ago, four partners left a large firm to practice independently. They took some large clients with them but started to build up a portfolio of smaller clients as well. Tax staff were recruited on an ad hoc basis as need arose. After being claims free for many years, two large tax claims were made against the firm. Their insurers were looking to massively increase both excesses and premiums at their next renewal.
Solution: MAS reviewed the entire way that tax was handled by the firm looking at managing the diverse areas of risk which had grown with the types of client and staff. Procedures (simple but effective), reporting structures were introduced and areas of technical risk were identified and tabulated.
Outcome: The firm was able to demonstrate to their insurers that they were a “good bet” and the increases were dramatically cut but the partners now have a more productive tax function which actually runs with fewer staff!
4) VAT and the Internet
Client Profile
Type: Expanding internet business
Sector: Effectively the holiday business
Background: A sole practitioner had been acting for a group of friends who a set up an internet business which facilitated booking holiday rentals. Their business was expanding rapidly with the turnover growing both here and in several major European Countries. Whilst the client had a UK VAT Registration, the sole practitioner was concerned that they might be missing something.
Solution: MAS carried a review of what their business really was, from where it arose and looked at the type and place of supply. Our review indicated that if their expansion continued, the client would have to register for VAT in roughly 15 different countries in the near future!
Outcome: The client was able to change their terms and conditions so that the supplies were made in the UK and only UK registration would be required. At the same time, the client was advised on how to minimise irrecoverable VAT.
