TalkTax

The recent TRA decision involving Mrs B Taxation Review Authority (“TRA”) No. 024/08 and her family home, which was owned by an LAQC has been criticised by some commentators because the arrangement was not sophisticated, there being no tenancy agreement and no company bank account. However, anecdotal evidence suggests that many if not most LAQC arrangements where the family home is owned by an LAQC are not cleverly executed and in fact Mrs B’s case may well be representative of the type of arrangements involving LAQCs and family homes.

Regardless of whether this is the case, it is important to appreciate that the TRA does not go so far as to say an LAQC can never own a family home without the arrangement amounting to tax avoidance. Accordingly, where arrangements are in the nature of an arm’s length arrangement, the question for the brave to determine is the point (if any) at which it will not be avoidance if an LAQC’s shareholder rents the family home from an LAQC and claims any resultant losses.

In closing it is noted that while the TRA authority is not high level, unless or until subsequent cases are appealed or heard by a higher authority, it is the best guidance available to date.