Ask the Experts
Each issue of The Schmidt Report carries Ask The Experts, a regular feature where our experts answer real questions posed by our subscribers (needless to say, their anonymity is preserved). Here are some typical recent examples:
Q. Can you advise if donations made to a political party are tax-deductible. I understand they are from various articles I have read, including one in the Daily Mail. If so, under which section would I put it on my tax return?
J. P., via email
A. Donations to political parties are not tax-deductible.
Q. Could you advise me in the following circumstances? I recently sold a piece of land. I have just realised that the land is in my name solely and not jointly with my wife, as I thought. Can I gift half to my wife prior to completion and what do I need to do?
R. S., via website
A. Transferring the land between exchange and completion will achieve nothing because, for capital gains tax (CGT) purposes, it is the date of exchange not the date of completion that is the effective date of disposal.
Instead, get your solicitor to draw up a deed stating that the land has always been held by you as bare trustee for your wife and that she has always been entitled to 50% beneficial ownership, as this appears to have been your intention all along.
Q. In March 2010’s ‘Tax Tip’, you refer to sale of goodwill of a dental practice at 10%. Why is it this rather than 18%?
Anon, via website
A. Ten per cent is the effective CGT rate after claiming entrepreneurs’ relief. This is available to people carrying out their own trades and reduces the taxable gain by 4/9. Taxing 5/9 of the gain at 18% gives an effective rate of 10% on 100% of the gain. Following the Budget, entrepreneurs’ relief is now available on the first £2m of any qualifying gain.
Q. In an attempt to reduce the size of my estate, I intend to buy a property primarily for the benefit of my children but would want to retain full control of it. From recent articles, am I right in thinking you would favour an LLP agreement rather than a trust? The purchase price would probably be no more than the current inheritance tax threshold of £325k.
H. M., via website
A. Actually, in this situation we would probably favour a trust. Under an LLP agreement, it is not as easy to separate control from beneficial ownership as it is in a trust, and if the value of the amount you are going to settle is less than £325,000 you set the trust up at no inheritance tax cost.