10th June 2024 Newsletter

It's starting to get interesting, this week the major political parties are set to release their manifesto and hopefully, we will find out the truth about their vision for tax going forward.? You will have seen or even heard that Rishi Sunak stated in the first of the televised debates that Labour was going to increase tax by ￡2,000 for every working family.?

The following day a Treasury civil servant stated that the Tories' assessment of Labour's tax plans “should not be presented as having been produced by the civil service”. ?

I expect like myself you are expecting to hear more of this story and maybe just maybe the manifesto will make the position much clearer. In haste to read the documents I turned to Google for dates and times, however, Initially, I was only given details of the communist manifesto released on 21st February 1848 ?( I think I need to refine my Google search terms).

In this week's edition, selling HMRC and brotherly love.

Grab a coffee or tea and a biscuit of choice.

HNRC for SALE

Yes, you did read the headline correctly, during the week I read an article on accounting web by Philip Fisher in which he discussed selling HMRC. I expect the article was written more as a tongue-in-cheek piece than a genuine suggestion. That said, it is most certainly worth a read, and the idea may stop you in your tracks and make you think for a moment.? To be honest and as I have mentioned before HMRC ?bears no resemblance to the organisation I recall when I started my working career with them back in the 1990s.? I remember the phone being answered within minutes and the ability for taxpayers to drop in at their local “DISTRICT” office of which there was one in every town and occasionally numerous offices.

This often leaves me wondering “is HMRC being run efficiently” and is “it fit for purpose”

Is the idea to SELL madness or is there some merit in the suggestion, I'm sure many have considered the option over recent years. How do you think as a nation, we would view the HMRC being privatised and if such a bold decision was made and actioned would this also go hand in hand with the new organisation having a say over tax policy and rates?? I only ask as I recently conducted a pole on LinkedIn where I asked ???

Who Should Determine Tax Policy in the UK? I imagined the results would be favourably in the government's corner, however, maybe it is a sign of the times that Experts & Businesses received 46%, an independent body 31% and the government came in third place with 23%. How would you have voted?? Maybe I should run the pole again to see if similar results are reflected.

Can you imagine a country where the Government had no responsibility for tax, surely that will never happen?

Brotherly Love?

A taxpayer who purchased a property to assist his bankrupt brother has successfully appealed against a discovery assessment, with the first-tier tribunal ruling that the property was entirely beneficially owned by his brother.

Background Since 1989, Rasiah Raveendran owned the leasehold of a London property, which his brother Indraraj operated his business from. In 2005, Indraraj was approached to buy the freehold. However, due to his bankruptcy in 2004, he was unable to secure a loan. Consequently, Raveendran bought the property in his own name for ￡300,000 in March 2005.

In May 2014, Raveendran sold the property to his sister-in-law, Indraraj’s wife, for ￡350,000. At the time of the sale, the property was valued at ￡1,080,000.

Discovery Assessment During an enquiry into Raveendran’s 2014/15 tax return, which did not mention the property transaction, HMRC discovered the sale. HMRC issued a discovery assessment for the sum of ￡191,973.50. The taxpayer appealed.

Trust and Beneficial Ownership Raveendran argued that he was not the beneficial owner of the property, contending that it was held in trust for his brother. Indraraj supported this, stating that Raveendran did not benefit financially from the purchase and only lent his name for the transaction.

Raveendran had agreed to help his brother with the understanding that Indraraj would take over the loan within five years. This did not happen, and issues with Raveendran’s credit score led to the property’s sale.

Financial Contributions A completion statement showed that two transfers of ￡22,000 and a loan in Raveendran’s name funded the property purchase. While the brothers claimed the transfers came from Indraraj, the bank records were unavailable due to their age.

The taxpayer confirmed that Indraraj paid the mortgage, transferring amounts to Raveendran, who then paid the bank. Evidence of ￡35,000 spent on renovations by Indraraj was also presented.

HMRC argued there was insufficient third-party evidence to prove that Raveendran was not the beneficial owner. They highlighted the absence of a trust deed and argued against the existence of a resulting or constructive trust.

Tribunal Decision The tribunal found that the discovery assessment was validly made but focused on determining the beneficial owner of the property. After evaluating the evidence, the tribunal concluded that Indraraj had funded the property’s purchase through direct contributions and mortgage payments. Both parties understood that the property was held for Indraraj, who also funded significant improvements.

The tribunal noted the lack of bank records was merely an absence of evidence and did not disprove the claim of beneficial ownership by Indraraj. They determined that the original transaction constituted a resulting trust.

As Indraraj was the beneficial owner and not Raveendran, the appeal was allowed.

HMRC’s Argument on Contributions HMRC argued that if a trust was found, the discovery assessment should be amended according to each party’s contributions, considering the mortgage as Raveendran’s contribution. This argument was rejected, as the tribunal found that Indraraj had funded the entire purchase price, making him the sole beneficial owner of the property.

"Where did the playlist go" many of you have been asking. Don't worry its back, if only I had known it was popular and even a conversation starter.

Please let me know what are your favorite tracks, and where you listen.

I hope you have enjoyed this edition of my newsletter, and found it both enjoyable and informative, if you have any suggestions or comments then please let me know?it is always good to hear from you. In addition to the newsletter, I am also updating the website, so please take a look from time to time to see what is happening.

If I or the Tax Matters team can be of any assistance to you, your family or your friends then please do not hesitate to contact me?at 01442 828006 or [email protected]