Banks challenge taxman in court
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Your support makes all the difference.NATIONAL WESTMINSTER and Barclays Bank are going to court to challenge an Inland Revenue ruling that Business Expansion Scheme offers that closed on Budget day are invalid.
In his last Budget speech, Norman Lamont declared that BES proposals that offered a way out after just six months via a loan would no longer qualify for tax relief from the midnight before Budget day.
NatWest and Barclays both had pounds 25m schemes that were wrapped up on Budget day. The Revenue says the shares were not issued in time, but the banks maintain that shares had been allotted and only clerical book entry was outstanding.
Derek Wanlass, group chief executive of NatWest, and Sir Peter Middleton, chairman of BZW, met Mr Lamont earlier this month to plead their case. But there has been no change in the Revenue's attitude.
'I'm disappointed,' said Michael Allsop, managing director of NatWest's specialised finance and markets. 'Perhaps it is the best solution for the courts to decide. It is a question of retrospective legislation.'
NatWest's Homeshare scheme has 1,450 investors and Barclays' Gracechurch scheme 1,750. The investors do not have to indicate in advance whether they intend to take a loan after six months or plan to remain in the scheme for the full five years required to keep BES tax relief.
The six-month anniversary is in September, so the banks feel there is some urgency in getting the matter settled.
Assured tenancy property schemes are rolling into their fifth year and some managers have been polling shareholders to see whether they want their money back at the first opportunity or prefer to wait for a more lively property market.
Johnson Fry, whose first scheme reaches its fifth anniversary next March, has written to 3,500 investors. Charles Fry, managing director, said 97 per cent had replied that they would like the investment to roll on.
The directors do not need investors' endorsement of their decision to keep the investment running, but they feel more comfortable knowing that they are pleasing the majority.
Investors with First Cambridge, which reaches its fifth anniversary in August, were also polled and 56 per cent of nearly 1,000 investors replied. Seventy per cent voted to stay invested for two years or more if necessary, 20 per cent said delay for a year or two and 10 per cent sell in 1993.
Managers are allowed to let on shorthold tenancies rather than the more secure assured tenancies after four years. First Cambridge already has 75 per cent of its property let on this basis.
Johnson Fry's SCAT series of companies was backed by an indemnity policy, and the insurers are having to pay out as the property market has been so dismal since they were launched in 1989.
Owen Inskip, managing director of Johnson Fry's property division, said: 'The market is on the turn and there are now very real signs for cautious optimism.'
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