dispute resolution and tax

Charlotte11183

Hi wondering if anyone can help with query - it has taken several years to settle a dispute with an ex. I left the joint business and business property/home in 2018 and been studying and PAYE since. I received a very modest sum to settle the tenancy through a Deed of Retirement this year. Do I need to file self assessment? If so is there anyway that I can attach the settlement to 2018 - which is the year it actually belongs to, it's just taken ages to go through the legal process... and is there anyway that I can claim business expenses on the solicitor fee regarding the business dispute even though I'm not currently in a business (I guess so to the latter, just by completing that section on the self assessment)? thanks in advance

Jeremy535897

By Deed of Retirement, do you mean a sum was paid to you for retiring from the business partnership? What tenancy was "settled"?

Charlotte11183

Hi Jeremy, the tenancy was an FBT 

Jeremy535897

Were you paid a sum for a share of improvements made during the farm business tenancy? Depending on what the amount was for, it is likely be either a capital receipt (if no more than £12,300 and you have no other gains this year, you need not worry about it), or a post cessation trading receipt, in which case see https://www.gov.uk/hmrc-internal-manuals/business-income-manual/bim90030. Expense relief is limited: https://www.gov.uk/hmrc-internal-manuals/business-income-manual/bim90080

Charlotte11183

Thank you Jeremy, I'm afraid it's neither of those though. Both me and my partner wanted to carry on in the business, but our personal relationship had broken down - they have now taken on the tenancy and are trading sole. The deed allowed him to do this and I settled for a very small amount just to get it done as with him remaining at the property there was no other way to settle

Charlotte11183

The date I left the business was in 2019 after a year of physically leaving the premises and I have no business accounts since then - The tenancy was in my name jointly with my ex partner, so personally, not part of the business partnership - hope that brings a bit more clarity to my question :-) 

Jeremy535897

It sounds as if this was a payment to you to relinquish any rights you had in respect of the tenancy. It is therefore likely to be a capital gain, with no base cost. If you received less than £12,300, and will have no other gains in the tax year, there cannot be any tax due. Even if it exceeds £12,300, to the extent the payment relates to your interest in the house you occupied as your main residence, it will be exempt. The difficulty is in determining what the exempt element is. How much did you receive?

Charlotte11183

Thanks Jeremy, I think that answers my question - I do need to do a self assessment, but there will be no tax due. Really appreciate your reply :-)  I just didn't want to overcomplicate things by doing a self assessment f not needed as I'm not actually self-employed this current year. 

Jeremy535897

If there is no tax due, and total proceeds are £49,200 or less, that transaction would not of itself require the completion of a self assessment tax return. SA 108 Notes on page 1 state:

"Fill in the ‘Capital Gains Tax summary’ pages if:
• you sold or disposed of chargeable assets which were worth more than £49,200
• your chargeable gains before taking off any losses were more than £12,300 (‘annual exempt amount’)
• you have gains in an earlier year taxable in this period
• you want to claim an allowable capital loss or make a capital gains claim or election for the year"

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1003753/SA108-Notes-2021_English.pdf

Charlotte11183

Hi Jeremy - Not sure if this would fall under other UK income on page 2 of tailor your return or not - if it's classified as capital gains then it's way below the threshold and I won't need to complete that section

Jeremy535897

As I said earlier, it sounds from what you have said that it is a capital gains tax matter, but you can only be sure if you show all the documentation to an accountant or tax adviser.