View more on these topics

Capital Gains Tax Reliefs

In the recent case of Palmer v Maloney a 57 year old businessman sued his accountant for negligent advice. Mr Palmer controlled a company &#34Autofreight&#34 and owned &#34GP Enterprises&#34 as a sole trader. He spent 42.3 to 45 hours per week at Autofreight and 5 to 7.7 hours per week at GP Enterprises. He wished to reduce his involvement in the company in a tax efficient manner while keeping the business for his daughter who worked there. The accountant recommended the built up profits should be distributed as dividends which was done, whereas had they been distributed as capital they would have qualified for retirement relief under TCGA 1992, thus saving tax.



The Court of Appeal held on a two to one majority that &#34full time&#34 meant devoting &#34substantially the whole of his time&#34 as a full-time working officer or employee of the company. This excluded time spent eating, sleeping or resting and it did not require him to work on the business of one company only. To decide if someone was full-time it was necessary to compare his hours with comparable workers and the more than 40 hours spent were sufficient. Time spent as a sole trader was irrelevant.



The dissenting opinion argued that the hours spent working as a sole trader were more than de minimis and enough to deny him retirement relief.



COMMENT:



Retirement relief will be abolished from 6 April 2003 and is already being phased out at present. Where large capital gains are involved, waiting for taper relief in the future may be more advantageous than retirement relief now.



Of course, in order to secure retirement relief, a disposal will need to be made. Where no third party buyer exists and a gift into trust for the benefit of others does not appeal, a gift into trust for the donor&#39s primary benefit could operate to crystalise the relief without losing beneficial access. This may appeal to business owners with gains on the qualifying assets (eg. shares) within the available retirement relief.



Retirement relief is given automatically by the Inland Revenue and does not need to be claimed by the taxpayer.



The decision, although of limited value, is helpful particularly where small or medium businesses are involved.

Recommended

NatWest cuts credit card interest rate

NatWest has cut the interest rate on its standard MasterCard and Visa card to 18.9 per cent, scrapping the card fee for every customer and offering a new introductory rate of 11.9 per cent for new customers.NatWest is the first high street bank to scrap fees. The change will take effect from 1 October 1999.Head […]

Friends Prov appoints Radio Authority head to ethical committee

Friends Provident has appointed the chief executive of the Radio Authority to its ethical stewardship committee of reference.Ovewr 200 applications were received for the place. The committee is responsible for constructing the detailed investment criteria for the stewardship range of funds and trusts.

Sun Bank makes new board appointment

Sun Bank has appointed Liz Stephens as its operations director.Stephens will be responsible for all service and processing of the bank&#39s business including residential and commercial mortgages, customer services and special projects.She will report directly to the bank&#39s managing director Mark Sismey-Durrant.

Northern Rock launches three new bonds

Northern Rock is launching a new range of fixed rate bonds. The 3-year bond offers up to 7 per cent per annum fixed until 1 November 2002.The 2-year bond offers up to 6.75 per cent per annum until November 2001 and the 1-year bond up to 6.3 per annum fixed until 1 November 2000.The fixed-rate […]

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

    Leave a comment