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Topical UK Tax IssuesMarcus ParkerSTEP CaymanDecember 9th 2014
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What is the topical connection between Angelina and UK tax?
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• Tax information reporting – TIEAs, UK FATCA• DOTAS – Disclosure of Tax Avoidance Schemes• Ever changing tax legislation and closing “loopholes”• HMRC aggressively litigating tax avoidance schemes (and often succeeding)• Accelerated Payments• Increased penalties and jail time• Reputational issues – “morally wrong” and “very dodgy”
Tough environment for tax evaders but also tax avoiders and tax planners?
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• New strict liability criminal offence of holding offshore accounts
• Disclosure opportunities• LDF still available until 5 April 2016 but with increasing restrictions (but still a full amnesty from criminal investigation and a 10% fixed penalty and time restricted tax liability)
• Specific settlement opportunities (e.g. for EBTs until March 2015)
Tough environment for tax evaders but also tax avoiders and tax planners?
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• 3, 16, 21, 31, 40, 45, 46, 60, 90, 91, 120, 183!• Statutory residence test since 6 April 2013• Relevant day count is not always 90!• Complicated rules (105 pages of guidance) and easy to make mistakes
• TEST 1: Automatic non-UK residence• TEST 2: Automatic UK residence
Residence
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• TEST 3: sufficient ties:• family• accommodation• work• 90 day• country (for leavers only)
• Exceptional circumstances• Split year rules
Residence
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Residence – sufficient ties tables
Days in the UK Number of ties
46-90 All 4
91-120 3+
Over 120 2+
Days in the UK Number of ties
16-45 4+
46-90 3+
91-120 2+
Over 120 1+
Table A (leavers only)
Table B
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• Domicile of origin – “tenacious”, “enduring”, “strong hold”, “need to sever bonds”, “adhesive”
• Domicile of dependence• Domicile of choice – “clearly and unequivocally proved”, “need powerful and cogent facts”
• Deemed domicile – 17/20 years; 3 years from leaving UK
• Evidence – intensely fact based approach• Burden of proof
Domicile – general rules
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• Morris v Davies 2011• “demonstrates the tenacious nature of a domicile of origin”
• UK v Belgium• Property• Family• Work• Culture• Cats!
Domicile – some examples
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• Sekhri v Ray 2013• “human tragedy” and “financial suicide”• India v England v Singapore• Wife – Indian domicile of origin – had to prove she had acquired an English domicile of choice• Husband – wife had to prove he had, and retained, an English domicile of origin
Domicile – some examples
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• In consultation: Non-residents to lose £10,000 personal allowance• Since 6 April 2014: “split contracts” don’t work• EBTs as a way to avoid PAYE and NICs – they don’t work • Tax planning schemes failing• New either immediately or from 6 April 2015: specific restrictions on “loss relief” where tax avoidance is a purpose
Income tax
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• UK resident but not domiciled rules only• Not applicable to non-UK residents but remember temporary non-resident rules
• Since 4 August 2014: changes to remittance of loans and offshore collateral
• NEW from 6 April 2015: Increase in remittance basis charge and a three year election only?
• 7/9 years still £30,000• 12/14 years £50,000 now £60,000• 17/20 years £90,000
Remittance rules
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• NEW From 6 April 2015: Non-UK residents will pay CGT on UK residential property gains (awaiting detailed rules)
• NEW From 6 April 2015: New PPR rules and restrictions (awaiting detailed rules)
• Since 6 April 2013: Enveloped property rules for non-natural persons - SDLT, ATED, CGT
• Increases in ATED and lowering of threshold to properties valued over £1 million from 6 April 2015
• Remember temporary non-resident rules
Capital Gains Tax
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Since 20 March 2014 – 15% rate on properties over £500,000 if purchased by an offshore company – this rate continues
SDLT – OLD rules
Up to £125,000 Nil
Over £125,000 to £250,000 1%
Over £250,000 to £500,000 3%
Over £500,000 to £1 million 4%
Over £1 million to £2 million 5%
Over £2 million 7%
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Stamp duty land tax: reform of structure, rates and thresholds
SDLT – NEW from 4 December 2014
Property value band
Rate
£0 - £125,000 0%
£125,000 – £250,000
2%
£250,000 – £925,000
5%
£925,000 – £1,500,000
10%
£1,500,001 + 12%
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Stamp duty land tax: reform of structure, rates and threshold
SDLT – NEW from 4 December 2014
Property purchase price
New SDLT Previous amount
£1 million £43,740 £40,000
£2 million £153,750 £100,000
£5 million £513,750 £350,000
£10 million £1,113, 750 £700,000
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• Nil rate band still £325,000• Transferable bands• Spouse exemption – not always unlimited• Spouse domicile election• Since 6 April 2013: restrictions on deducting debts for IHT purposes
• NEW from 6 April 2015: Specific amendments to combat unacceptable tax avoidance through the use of multiple trusts and simplified rules on calculating IHT on trusts
Inheritance tax
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• PROPOSED: Mansion Tax – “could put off a move to the UK”: Angelina Jolie
• Will increasing wealth based taxes lead to the wealthy moving out of, or stop investing in, the UK?
• Increased rates/reduced thresholds – remittance basis charge, ATED, tax rates?
• Continued HMRC crackdown on tax evasion, avoidance and planning
• More tax litigation• Challenges to domicile status• Increased access to information – nowhere to hide?• Citizenship based tax?
Other changes?
Questions
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Cassia Court, Camana BaySuite 716, 10 Market StreetGrand Cayman, KY1-9006Cayman Islands
Marcus ParkerPartnerDD: +1 345 943 7704 M: +1 345 938 7704T: +1 345 943 [email protected]
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