March Online Service Updates

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A new edition of Agricultural, Business and Heritage Property Relief (previously Business and Agricultural Property Relief) is always a cause for celebration by practitioners involved in the area because author Chris Erwood has the rare ability to explain complex issues with perfect clarity. For example, here’s how the coverage of BPR clawback begins:

“BPR may be subject to clawback where following a transfer which potentially (PET) or actually (chargeable lifetime transfer (CLT)) qualified for BPR, certain conditions are not satisfied at point of retest. The rule, which is contained in IHTA 1984, s 113A, operates to claw back BPR which would otherwise have sheltered a lifetime transfer of value thus it only applies where that transfer is made within seven years of the death of the transferor.”

The seismic changes to UK accounting rules over the last few years continue to exercise tax practitioners too. For those, like myself, who qualified way back in the last century and still tend to think in terms of ICTA 1970, it will take a while to get used to FRS 102. There is no better guide to the new rules than James Lole in the new edition of Accounting Principles for Tax Purposes. Here’s an extract from his coverage of a subject all of us run into from time to time, the revenue recognition rules:

“It is important to understand the percentage of completion method as it is the basis for recognising revenue on construction and service contracts, both initially and as the service or construction contract progresses. Note that we are here recognising revenue, which is treated as accrued income. It is not recognising work in progress. A simple example will explain. A builder has a contract to build a barn for a contract price of £100,000. His expected costs are £80,000. At the balance sheet date he has completed 80% of the work. The costs of that work to date are £67,000. FRS 102, Section 23 follows SSAP 9 in requiring such contracts to be recognised under the percentage of completion method by including accrued income of £80,000 within revenue, referred to as turnover in CA 2006. The builder thus records a profit of £13,000 in the current year, the difference between the accrued income and the costs to date. UITF 40 applied a similar basis to service contracts.”

Andrew Needham has prepared a very useful MTD checklist from the VAT practitioner’s perspective. Here are the notes on output tax:
“To show the link between the output tax in business records and the output tax on the return, the business must have a record of:
• the output tax owed on sales;
• the output tax owed on acquisitions from other EU Member States;
• the tax due under the reverse charge procedure;
• the tax that needs to be paid following a correction or error adjustment;
• any other adjustment required by VAT rules.”
The full checklist is here:

Beswick & Wine: Buying and Selling Private Companies and Businesses has been updated to the latest edition for subscribers to UK Tax Online. Readers who are already familiar with this title will know how good it is, but if you are involved in a business acquisition or disposal and haven’t used Beswick & Wine before, check it out, because author Susan Singleton combines long experience of the area with terrific communication skills. For example, how many practitioners haven’t received one of those “should I have mentioned this earlier?” calls from a client:

“Some advisers are fortunate to be involved in the selling process at an early stage, either instructed directly by the seller or instructed for a specific purpose by the seller’s financial advisers. Others are less fortunate and are instructed at the eleventh hour, leaving little opportunity to add value to their advice or otherwise act in a proactive manner. Whatever the case, an understanding of the reasons for sale and how the terms agreed with the purchaser, or sought by the seller, have been arrived at is of paramount importance in order to provide the best possible advice. Without this understanding and knowledge, advisers are ill-equipped to identify the key commercial objectives of the transaction, and accordingly to advise and document the transaction effectively and efficiently.”

Precedent of the month: a truly essential precedent this month for anyone involved in estate planning, the Deed of variation election alternatives; precedent and notes from Ray & McLaughlin’s Practical Inheritance Tax Planning:

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