Month: September 2020

Month: September 2020

UK Divorce laws overhaul will ‘end blame game’ for couples

Existing UK divorce laws mean spouses have to provide evidence for a divorce if one partner does not agree to it.

For the first time in 50 years, UK divorce laws are being overhauled in an attempt to end the “blame game” for couples trying to end their marriage.

Current laws in England and Wales dictate that unless someone can prove there was adultery, unreasonable behaviour or desertion, the only way to get divorced without a spouse’s agreement is to live apart (be separated) for five years.

The new laws state that one side will now only have to submit a “statement of irretrievable breakdown” to say the marriage has broken down; instead of having to provide evidence about length of separation or their spouse’s behaviour. In addition to this,the ability of one partner to contest a divorce will also be scrapped.

The existing two-stage process of a decree nisi, a document which says the court cannot see any reason why you cannot divorce, followed by a decree absolute, the legal document which ends a marriage, will remain the same; however, a six month minimum period will be introduced between the lodging of a petition to the divorce being made absolute.

Couples will also be able to make joint divorce applications, alongside the current option for one partner to start the process.

Similar changes will also be made to the law governing the dissolution of civil partnerships.

The overhaul follows a government consultation last year, when details of the proposals were first unveiled.

The Ministry of Justice said the new legislation is expected to be introduced as soon as parliamentary time allows.

The cost of divorce

The cost of divorce in the UK has soared by 17 per cent in the past three years, with divorcing and separating couples now typically spending £14,561 on legal and lifestyle costs, a new report by Aviva reveals.

On top of this, couples who move house as a result of the separation spend tens of thousands of pounds on moving house. Those who rent – which applies to more than half of divorcees – spend around £35,000, while those who go onto buy a new property (16%) spend £144,600 on average.

The report reveals soaring legal fees and the cost of redecorating homes, as well as moving house, are central to this rise.

Legal fees have more than doubled since 2014, up by 109% from £1,280 to £2,679, with any additional costs in child custody battles having also increased by 62%, from £3,500 to £5,671.

The cost of redecorating a previously shared home has also risen by around 73%.

Concern about the cost of divorce

Due to these soaring costs, for a significant proportion of separated couples – 16% – affordability remains such a concern that they remain living together in the same house because they can’t afford to move.

Aviva’s findings indicate the majority (68 per cent) of couples who divorce or separate have financial issues to resolve, with the process taking on average 14 and a half months – three months longer than in 2014.

The report comes as new data revealed the number of divorces in England and Wales increased by 6% between 2015 and 2016 to 106,959 – in what marked the first rise since 2009.

In light of the findings, Paul Brencher, Aviva’s health and protection director, said: “The breakdown of a marriage or long-term relationship is likely to be one of the most emotionally demanding life events for people who experience it. While it may seem completely unnecessary to plan for such an unfortunate life event, it is important that both partners in a relationship take an active interest in their financial affairs, even if one tends to take the lead.”

Help

If you need expert advice on any aspect of family law, Kancelaria Prawna Bernard Łukomski is the place to turn to. Our lawyers are highly trained, experienced and knowledgeable in everything from marriage and divorce to issues involving children. If you are going through a difficult time and need expert advice you can trust, we can help.

VAT Taxation on rental of residential property. Warsaw, April 16, 2020

Rental of residential properties may be subject to three different VAT taxation regimes:

(a) exemption;
(b) the 23% VAT rate and
(c) the 8% VAT rate (so-called accommodation related services).

I. General comments

The purpose of the services provided is decisive for determining the applicable VAT rate.

The tenant’s actual use of the property should also be consistent with the intended purpose of the services.

For example, a short stay of a tourist or a businessman should be treated as non-residential stay.

Non-residential stay is typically offered by hotels, guesthouses, rooms offered for short-term rent.

The residential purpose excludes temporary stay and vice versa.

The residential purpose is related to satisfying the tenant’s vital needs.

In other words, the rental services can be exempted from VAT (e.g. renting an apartment) depending on whether the rented property satisfies the vital needs, regardless of the duration of the rental period.

II. Rental services exempted from VAT

Only a rental of real property for residential purposes is VAT-exempt.

In addition, rental services must be provided by the landlord acting on his own account.

The possibility of taking advantage of the VAT-exemption is therefore conditional upon the fulfilment of both objective and subjective criteria.

The property must be of a residential character (objective criterion) and the purpose of the rental agreement must be to satisfy the customer’s residential needs (subjective criterion).

The possibility of benefiting from a VAT exemption is therefore conditional and depends on meeting the specific requirements:

– the residential nature of the rented property and

– the purpose for which the property is used must also be residential.

As a consequence, the VAT-exemption does not apply to a rental of residential property for non-residential purposes.

The availability of the VAT exemption does not depend on the type and/or legal form of the service provider or the entity purchasing such services.

If the tenant is not a tourist, spa visitor, business traveler etc., but his/her intention is to permanently reside in a given place, then the provider of the rental services will qualify for the VAT-exemption.

Real property rental services are VAT-exempted provided that all the conditions regarding (a) the parties, (b) the object and (c) the purpose of the specific contract, are met.

Therefore, the VAT taxpayer will be able to take advantage of the VAT exemption if the lease agreement contains, inter alia, provisions clearly stipulating that it concerns residential premises and the premises may be used by the tenant only for his personal residential purposes.

III. Rental services taxed at the 23% VAT rate

A rental of residential premises by a person who does not personally provide accommodation services but provides such services, for example, to a company conducting business activities involving the provision of short-term accommodation services, is taxed at the rate of 23%.

In addition, any rental of residential property for business purposes is taxed at the rate of 23% VAT (e.g. office, company headquarters).

IV. Services taxed at the 8% VAT rate

In accordance with art. 41 section 2 of the VAT Act, the so-called accommodation-related services are subject to the 8% VAT rate.

The accommodation-related services include, among other things:

(a) accommodation and associated services provided by hotels, motels, boarding houses, wellness centers and other hotel facilities

and

(b) temporary or long-term accommodation in student hostels, boarding schools and dormitories, workers hotels, apartment houses.

The differences between a typical rental and the accommodation-related services include:

(1) the availability of auxiliary services (laundry and basic equipment for the rented premises are usually provided in addition to the accommodation services);

(2) the period of stay in the premises (usually shorter for accommodation-related services).

Where the taxpayer:

– runs a business of short-term rental of apartments for tourists and people traveling for business purposes,

– the apartments are not his /her property, but he/she manages them on the basis of separate contracts concluded with their owners,

– prepares offers and accepts reservations via online booking portals,

– responds to customers’ inquiries,

– makes sure the apartments are available to guests on time,

– provides fresh towels, linen and refreshments,

– is responsible for keeping apartments clean,

– is responsible for minor repairs, etc.

thus enabling the visitors to conveniently use the premises, then the VAT exemption will not apply.

However, such services as described above are subject to the 8% VAT rate.

V. Summary

The taxation regime for rental of real property depends on the objective purpose and manner of using the property by the tenant, as well as the subjective intentions of the parties to the lease agreement.

Bernard Łukomski
Legal counsel
Warsaw, April 16, 2020