The View from No 50





January 2014

K P Bonney & Co

Chartered Accountants and

Chartered Tax Advisers

50 Cleasby Road  Menston

Ilkley  LS29 6JA

Tel:  01943 870933

Fax:  01943 870925







A rich dentist bought Glapwell Football Club.  Or rather he bought the club through his very successful company.  So the group consisted of the profitable dentistry company and the loss making football club.


In group situations like this you can offset the losses of one group member against the profits of another.  Result - lower corporation tax bills.


But there is a condition.  In order to obtain this offset the company surrendering the loss must have an expectation of making profits in the future.  HMRC contended the football club had no such expectation.  Despite putting forward detailed business plans the company was unable to persuade the tribunal otherwise.  So the relief was denied.


With some high profile clubs being owned by UK groups of companies one wonders whether this decision might encourage HMRC to tackle a bigger player next.


Any suggestions?





If you are one of those hard-working taxpayers, paying the right amount of tax at the right time you can be forgiven for feeling somewhat frustrated right now.


Why is it that HMRC is laying off 3,000 fixed term contract staff at a time when


Taxpayers who are required to but have not filed tax returns for many years are not being pursued


Taxpayers who owe tax are not even being approached for payment


By its own admission HMRC is managing to answer only 3 out 4 telephone calls





By its own estimate HMRC reckons the tax gap is £35bn or 7% of total tax liabilities.  That is not £35bn end of.  That is £35bn per annum!


No doubt the Treasury can deliver some great spin for the job cuts but surely to goodness with tax going unpaid and service levels so low it would make more sense to re-deploy these good people in doing other things.


Come on Treasury.  Think.  The way to shrink the deficit isn’t always to cut expenditure.   Put the resources where they will be more productive.


Then perhaps the rest of us won’t feel so aggrieved about paying on time every time.





The Chancellor announced in the Autumn statement that the capital gains tax main residence exemption, which applies when you sell your home at a profit, is to be curtailed in certain circumstances.  The change only impacts on people who sell a former residence of theirs after having moved elsewhere.  Up until now a period of three years’ absence at the end of a period of ownership has benefited from the exemption from capital gains tax.  With effect from 6 April 2014 that period is reduced to 18 months.


The change might have been prompted in part by the media led public backlash against so-called ‘flipping’.  Flipping is entirely legitimate and many property owning taxpayers have availed themselves of its benefit.  But in hard times the practice has come to be seen as a sneaky trick.  Some politicians have come under fire for using it.  We all remember Hazel Blears waving her tax cheque at the cameras after being ‘found out’.


The change might have the effect of speeding up certain disposals of residential property.   Initial concerns that the change would have unfortunate consequences for people moving into care homes appear to have been ameliorated by provisions which allow for the period of exemption to remain 36 months in prescribed circumstances.





The legislation which grants exemption for the gain made on the disposal of a residence is short.  It amounts to only a few sections.


Consequently there is an abundance of case law on the subject.  One case with an interesting twist was heard by the first tier tribunal recently.   Its outcome turned around what constituted a dwelling house.


The taxpayer bought a house in 2003.   He later demolished it and built a new house on the same site.  He sold the house in 2006.  He did not include the disposal on his tax return for 2005/06 as he considered his gain was exempt.


Being informed about all land transactions, HMRC was aware of the disposal and opened an enquiry into the return.


Having established the facts HMRC accepted that the old house had been the taxpayer’s main residence.  But that house had been knocked down and the taxpayer had never lived in the new property.  Therefore, HMRC contended, no exemption was due on the new house.


The matter proceeded to tribunal.


The tribunal judge considered the ordinary meaning of ‘dwelling house’ referred to the building rather than the land on which the building stood.  Thus, if one house was demolished and a new house built in its place, the new house was not the same dwelling house as the old one.  As the taxpayer did not as a matter of fact occupy the new house as a residence the capital gains tax exemption was not available.


The other tribunal member concluded that where it was more cost effective to rebuild a house than refurbish it, the new construction should be regarded as the same construction as the original.  As the taxpayer occupied the house as his residence at some time during his period of ownership the exemption was available.


The judge had the casting vote so his opinion prevailed.


The taxpayer’s appeal was dismissed.


The combination of the demolition of the old house and the failure to occupy the new one as a residence meant the taxpayer was denied the exemption.


The taxpayer can consider himself unfortunate.  Few would have foreseen that pitfall.







Great British taxpayers pay the final instalment of their 2012/13 tax bills on 31 January 2014.  This is the first year in which ‘high income’ individuals have to pay back any child benefit received by their household.


No doubt the vast majority affected by this change have volunteered to stop receiving child benefit or have registered for self-assessment and have declared their liability to pay the high income child benefit charge.


It is inevitable that some people, through blissful ignorance, will not pay.  Reasons for this could include not knowing their partner receives child benefit and not knowing their relationship with somebody has developed to the point where it has become ‘caught’.


Do we think HMRC has the resources to identify and find these people?


Only the informed pay.


We shake our heads.







Julia began her job as a counsellor in a secondary school and she was keen to help the pupils.


One day, during break-time, she noticed a girl standing all by herself on one side of the playing field while the rest of the children were enjoying a game of football at the other end. Julia approached the girl and asked her if she was all right. The girl said that she was.


Sometime later Julia noticed that the girl was in exactly the same spot and still by herself. Going up to her again, she enquired, 'Would you like me to be your friend?' The girl hesitated then said, 'Alright,' while looking at Julia with some suspicion. Feeling she was making progress, Julia then asked, 'Why are you standing here all alone?' 'Because,' the girl said with a large sigh, 'I'm the goalie!'



Copyright:  K P Bonney & Co LLP 2014.  All rights reserved.  No part of this publication may be produced, stored in a retrieval system, or transmitted in any form or by any means, electronic mechanical, photocopying, recording or otherwise without prior written permission of the publishers.  Disclaimer:  The publishers have taken all due care in the preparation of this publication.  No responsibility for loss occasioned to any person acting or refraining from action as a result of any material in this publication can be accepted by the authors or the publisher.

Back to the home page