CheckLists.Tax (beta)
G4: Use of company property
GENERAL
Query whether the company genuinely own a property used as the family home
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- "[52] Whether assets legally vested in a company are beneficially owned by its controller is a highly fact-specific issue. It is not possible to give general guidance going beyond the ordinary principles and presumptions of equity, especially those relating to gifts and resulting trusts. But I venture to suggest, however tentatively, that in the case of the matrimonial home, the facts are quite likely to justify the inference that the property was held on trust for a spouse who owned and controlled the company. In many, perhaps most cases, the occupation of the company's property as the matrimonial home of its controller will not be easily justified in the company's interest, especially if it is gratuitous. The intention will normally be that the spouse in control of the company intends to retain a degree of control over the matrimonial home which is not consistent with the company's beneficial ownership. Of course, structures can be devised which give a different impression, and some of them will be entirely genuine. But where, say, the terms of acquisition and occupation of the matrimonial home are arranged between the husband in his personal capacity and the husband in his capacity as the sole effective agent of the company (or someone else acting at his direction), judges exercising family jurisdiction are entitled to be sceptical about whether the terms of occupation are really what they are said to be, or are simply a sham to conceal the reality of the husband's beneficial ownership." (Prest v. Petrodel Resources Limited [2013] UKSC 34)
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EMPLOYMENT INCOME TAX
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- Accommodation provided by reason of employment
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- Query whether accommodation is provided if it is made available for use but not used (EIM11405 onwards).
- "If the living accommodation was bought as holiday accommodation for a director and family, provided is likely to mean available for use. By contrast if it was bought as a genuine letting business by the employer and has been let out commercially then provided will only mean the periods of actual use by the employee." (EIM11406).
- Accommodation provided by the employer is regarded as provided by reason of employment (unless employer is individual providing it in the course of personal relationships)
- HMRC regard the employer as providing the accommodation if it is, ultimately, the source of the funds used to pay for the benefit (EIM21220).
- From 2016/17, charge is not displaced if market rent is paid (s.97(1A)) but there is provision re making good.
Legislation: ITEPA s.97;
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HMRC manuals: EIM21220; EIM11405 onwards;
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- Benefit provided to family member of employee
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- The benefit is chargeable on the employee.
- If the recipient is family of more than one employee, apply the list in ITEPA s.721(4) in order (Baylis, §6(2)).
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Cases: Baylis v. HMRC [2016] UKFTT 725 (TC), Judge Redston;
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- Benefit provided to shadow director (or family member)
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- In the benefits code, director includes any person in accordance with whose directions or instructions the directors of the company are accustomed to act.
- See the definition of director in ITEPA s.67(1).
- Where a person occupies accommodation owned by a company, it is necessary to consider whether the individual may be regarded as a shadow director.
Legislation: ITEPA s.67(1);
Cases: Secretary of State for Trade and Industry v. Deverell [2001] Ch 340; Ultraframe v. Fielding [2005] EWHC 1638;
HMRC manuals: EIM11413;
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- Benefit provided to former employee
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- No charge under the benefits code but consider the termination of employment charge, disguised remuneration and EFURBS.
Legislation: ITEPA s.401;
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CAPITAL GAINS TAX
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Matching trust gains to benefits (s.87 + s.89(2) + Sch 4C)
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- Trust gains matched to capital payment/benefit from close company etc. controlled by trustees
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- Occupation/use of property is potentially a capital payment/benefit from the company.
- See G5. Other benefits.
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INHERITANCE TAX
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XX
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XX
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