The View from No 50





May 2015

K P Bonney & Co

Chartered Accountants and

Chartered Tax Advisers

50 Cleasby Road  Menston

Ilkley  LS29 6JA

Tel:  01943 870933

Fax:  01943 870925







David Cameron has said much about rewarding marriage through the tax system.  On 6 April 2015 we saw the introduction of the transferable allowance for married couples and civil partners.


The transfer facility is open to couples and partners where neither person is liable to income tax at a rate above the basic rate.  In other words neither has income of more than £42,385.


The basic personal allowance for 2015/16 is £10,600.  Out of this the maximum amount a person can transfer is £1,060.  So the maximum potential saving is £212 (£1,060 x 20%).


For most taxpayers the application is digital via


We applaud anything which lessens the tax burden for low income couples.  But we foresee issues around consent, privacy, access for the digitally challenged and unexpected increases and decreases in income levels.


Simplification this ain’t.






So if granny gives me her fortune but dies within seven years how will anybody ever know what she did?  The inference being, can’t we just forget about (evade) the inheritance tax liability?


I have been asked this question quite a few times over the years by concerned families.  The answer is always the same.  You can’t do that. But I have no doubt it goes on.


The executors of Mr Clayton Snr. took care to ask his children whether they had received any gifts from him during the last seven years of his life.  ‘None’, came the answer.  The executors prepared the inheritance tax return accordingly.


Two years later HMRC was tipped off that Mr Clayton Jnr held an undeclared Swiss account.  After reviewing the account it was found he had received nearly £450,000 from his father six months before his death. 


HMRC held Mr Clayton Jnr personally liable for the additional inheritance tax due and imposed a 65% penalty (£87,000) for failing to disclose the gift.  Mr Clayton Jnr appealed.  He blamed the executors for not being clear in their request for information and for not carrying out a sufficiently thorough search of the contents of his father’s house.


His appeal failed.


This case is interesting because it provides comfort to executors that they are not required to search a house for every document and are entitled to rely on information provided by the deceased's family and advisers. It also re-emphasises their duty to document their enquiries when completing the IHT return. It further reminds beneficiaries of the importance of answering executors' enquiries honestly.






There is a VAT exemption for tuition provided by a sole trader or partner in a partnership of a subject which is included in the curriculum of a typical school or university.  This means that lessons in music, languages or maths, for example, are exempt from VAT.


In recent years a number of cases have come before the tribunals in which tutors have tried to argue that the subjects they teach are ordinarily taught in a school or university.


Pilates, yoga and belly dancing have all been held to be subjects not included in the curriculum of the ordinary school or university with the result that the tutors have been required to account for VAT at the standard rate.


In these circumstances it falls to the unfortunate tutors to find the VAT out of the money received.  They can ask the pupils / parents for a contribution to their unexpected VAT bill but they cannot insist.


As for the future they can increase their prices but that may drive away new and existing clients.


Violin anybody?






I remember the day in 1986 when Nigel Lawson announced the replacement of capital transfer tax with inheritance tax.  This opened a period in history when it was possible to transfer unlimited wealth free of all capital taxes with the exception that inheritance tax applied if the giver did not survive for seven years.


I remember the day in 2002 when Gordon Brown introduced the nil rate of corporation tax for small limited companies.


In 1989 Lawson put the plug back in the hole by re-introducing capital gains tax on lifetime gifts generally.  In that three year period many wealthy families must have driven the proverbial coach and horses through that particular opening.


Brown also reversed his own measure in 2006 (not one to admit to a U-turn this was announced as a simplification measure) but only after every Tom, Dick and Harry had made himself Tom Ltd, Dick Ltd and Harry Ltd and cost the country a fortune.


Whatever your line of work, you know when a minister makes a serious error of judgement.  These are the two most obvious examples which spring to mind from my time in tax.


Are there any errors of judgement out there right now which are likely to be corrected in the near future?


Pension relief.


Under the new flexible defined contribution pension regime you can leave any residual pension fund of yours to your chosen beneficiaries.   If you die before age 75 and if you have made the right nominations your pension pot can cascade down the generations free of inheritance tax and income tax, available to fund the lifestyles of your children and your children’s children.  Even if you die aged 75 or over it is still possible your children may be able to time their withdrawals from the fund so that they pay little or no tax.


Given that you can obtain income tax relief at up to 60% on your contributions (see the March 2015 newsletter) this is an unusually benevolent regime.


Do think about nominating suitable beneficiaries to receive or look after your pension pot after you die.


Particularly if you are higher rate taxpayer, do consider making contributions now.  I and many others in the tax profession believe higher rate tax relief for personal pension contributions is the next stable door waiting to be shut.






As we head off to the polling stations here is a verse from A P Herbert (1890 – 1971)


Well fancy giving money to the government!

Might as well have put it down the drain.

Fancy giving money to the government!

Nobody will see the stuff again.

Well, they’ve no idea what money’s for…

Ten to one they’ll start another war.

I’ve heard a lot of silly things but, Lor’!

Fancy giving money to the government!






An actor had been out of work for fifteen years because he had a problem remembering his lines.


One day he received a call from a director offering him a small part in a play.  All he had to say was, “Hark, I hear the cannon roar!”


After much worry the actor decided to take the part.


Opening night arrived.  As he stood in the wings he repeated to himself, “Hark, I hear the cannons roar!....Hark, I hear the cannons roar!”


The time for his entrance finally came and he strode out onto the stage.  At that moment there was an almighty boom.   He turned round and said “What the hell was that?”



Copyright:  K P Bonney & Co LLP 2015.  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.







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