Posts Tagged ‘UK Tax’

UK new disclosure opportunity

Friday, November 27th, 2009

In her FT article of November 27 2009, Vanessa Houlder explains that more sanctions are expected to be unveiled next month, as the UK Revenue & Customs pushed forward the deadline for registering for its “new disclosure opportunity”, which offers tax evaders reduced penalties and a lower risk of prosecution, from November 30 to January 4.

The extension, which had been expected by advisers, is a bid to increase take-up of the initiative.

Many of the 308 banks served legal notices in August requiring them to divulge account details have not yet handed over the information, in some cases because they are still appealing against the notices. The extensions will mean more of this information will be handed over to the Revenue, allowing them to alert individuals directly. It will also give banks more time to alert their customers to disclosure initiatives which are also under way in France and Italy.

Tax advisers are expecting a stiffening of the penalty regime in next month’s pre-Budget report, amid speculation that fines could be increased to more than 100 per cent of the tax due.

Dave Hartnett, permanent secretary for tax at Revenue & Customs, said: “We know that some bank customers will not be contacted by their banks in good time for the original deadline of November 30, so in the interests of fairness we have decided to extend our deadline by a month to January 4.”

Gary Ashford of the Chartered Institute of Taxation, said: “This is a sensible and realistic move which recognises the lack of time under the original deadlines.”

Paul Roberts of Grant Thornton, a professional services firm, said the extension was unsurprising given the slow initial take-up of the initiative. But he warned that even though the registration period had been extended, the deadlines for submitting full details of the disclosures were unchanged.

Taxpayers will have to collect up to 20 years of data about their offshore accounts to meet the deadline of the end of January for paper submissions and 12 March for online disclosures.

Tax evaders who come forward under the initiative face a fixed penalty of 10 per cent of the tax owed unless they were customers of the five high street banks targeted in a 2007 amnesty, who face a 20 per cent penalty.

UK Non Resident Rules monitored by the Revenue

Wednesday, June 17th, 2009

The tax-exempt ‘non-resident’ status will be closely monitored by the Revenue as reported by The Times. Many affluent Brits living in Spain are enjoying a Non-resident status, and they ensure to spend no more than 90 days a year in the UK after moving abroad.

Tax and the Premier League

Tuesday, May 26th, 2009

When we published our first article on the Beckham Law in the Tax Journal, back in 2004, our English colleagues were amazed. Spain was developing legislation to attract international footballers, taxing them effectively at 24% and giving them a worldwide tax exemption on international income. Being the international exemption similar to the non domicile regimen in England in the good old days. (more…)


Thursday, January 22nd, 2009

As reported by the OECD the Bailiwick of Guernsey and the United Kingdom have today signed a bilateral agreement for exchange of information for tax purposes bringing to 10 the number of such agreements entered into by Guernsey, including:

This particular agreement is especially significant given the close economic and political relations between Guernsey and the United Kingdom.

Jeffrey Owens, Director of the OECD’s Centre for Tax Policy and Administration welcomed the new agreement as an important development. Given the current financial crisis, he noted, “it is now more important than ever that countries implement international standards of transparency and exchange of information.”

“Guernsey has signed nine tax information agreements with other countries within the past year, making its commitment to international standards in these areas clear and strengthening its reputation as a legitimate financial centre,” Mr. Owens said. “Guernsey has shown that the standards can be implemented quickly where there is a real willingness to do so.”

A bit of history to understand the relationship between Guernsey and the United Kingdom.

The Bailiwick of Guernsey is a British crown dependency off the coast of France. As well as the island of Guernsey itself, it also includes Alderney, Sark, Herm, Jethou, Brecqhou, Burhou and other islets. There are 10 Parishes in Guernsey. Together with the Bailiwick of Jersey, it is included in the collective grouping known as the Channel Islands. It is known in French as Guernesey.

According to the official States of Guernsey webpage, everything began in 933 AD when the Channel Islands became part of the Norman Realm. In 1066, the Duke of Normandy landed his army in Sussex and became William I of England. The Channel Islands, however, remained part of the Duchy of Normandy and continued to be governed as such.

When Continental Normandy was lost in 1204 the Channel Islands remained loyal to the King of England as the King promised to rule the islands as though he was the Duke of Normandy (i.e. observing the Duchy’s laws, customs and liberties). The special tax exemption regime in respect of the Kingdom of England was maintained since those times.

This arrangement has been confirmed in charters of successive sovereigns that have secured for the islands their own judiciaries and freedom from the process of the English Courts. Indeed the Islands are independent in all matters with the exception of international representation and defence for which the United Kingdom is responsible.

My experience of the States of Guernsey fiduciary and Trust system as well as the financial and business environment in general has been very positive. I also recommend Guernsey as a fabulous place to visit.


Monday, November 24th, 2008

This year more than ever, perhaps inspired by the US Financial Summit, the people of the UK waited for the Pre-Budget 2008 with the hope to see some light at the end of the tunnel.

After listening to Mr Darling today the words “been there, done that” inevitably come to mind.

Of course we welcome the bringing forward of £3 billion of capital spending to 2008/09 and the small 2.5% VAT temporary rebate. These are the two most important measures introduced this year. Would that be enough to fuel the British Economy?

Personally, I was expecting a smarter use of tax policies aimed to increase business confidence, consumer expenditure or to attract further investment from companies or entrepreneurs.

It is difficult to see how a temporary reduction of 2.5% in the VAT rate could be sufficient to generate trust among the business community, nor to talk about consumers.

Very little else has been said beyond the traditional liturgy. As every year the personal allowances are updated, some adjustments in the National Insurance Contributions are made and improvements in the collection of taxes are also announced. That’s All Folks!

With a little bit of twisting here and there, this report could have been similar to that of previous years from a purely tax point of view.

Let’s look at the press notices to highligh the main points of this report.

  1. Facing global challenges: supporting people through difficult times. A nice introduction to respond to people’s expectations. Fair enough if you stop reading here.
  2. VAT, Income Tax, NIC, etc….. Nihil Novi Sub Sole, apart from the 2.5% temporary VAT rebate. You can determine by yourself if any of these measures could help to increase business confidence, consumer expenditure or attract further investment from companies or entrepreneurs.
  3. Ensuring fairness for all taxpayers A real classic before elections and let me make the point clearer by quoting: “The Chancellor announced today a package of measures designed to protect the tax system from abuse and ensure that all individuals and businesses pay the right amount of tax”. How is this going to be achieved without investing more in the Tax Offices of HM Inland Revenue and Customs, its staff and its IT systems?

We, the people working in the real economy, look forward to see a smarter use of tax policies to fuel the Economy. It would be great to see that the Pre-Budget 2008 is left behind by a new 2009 Budget acting as a real catalyst for the UK Economy.

Should Mr Darling have paved the road for some hopes to arise is something to be seen. I can not wait to see the Big 4 as well as financial analysts’ comments in tomorrow’s papers.

Meanwhile, and as usual I welcome your comments.

************************************************************************************************ 25/11/2008

Tony Cohen, a former colleague and partner of Deloitte UK heading the entrepreneurial business team, says:

“We welcome the fact that the Chancellor has announced a number of relatively small measures which together will certainly help entrepreneurs and SMEs in the current economic environment.¨

…The deferral for one year of the rise in the small companies rate of corporation tax is also welcome – although it is just for one year. Will this be a sufficient amount of time for these businesses to recover as they will likely need more time to rebuild?….

….On the face of it there is a massive pot of up to £3 billion available to the UK’s growing businesses. The big question is how, how much and how easily they get their hands on it. Entrepreneurial businesses need funds to flourish and all the measures in the Chancellor’s Pre-Budget Report, most especially the access to cash, will focus the mind of the UK’s entrepreneurs.”


Monday, November 3rd, 2008

Married couples and civil partners whose spouse or civil partner dies without leaving a will are to benefit from an increase in the statutory legacy under proposals published by the government.

The government has acted after concerns that the levels of the statutory legacy, currently set at £125,000 and £200,000, were too low, as stated by the Ministry of Justice

Next year, the statutory legacy level will increase to £250,000 and £450,000.

Justice Minister Bridget Prentice said:

‘This increase will give extra protection to married couples and civil partners whose spouse or civil partner dies without making a will. But it also highlights how important it is for both men and women to make arrangements for their loved ones in the event of their deaths.

‘Married couples and civil partners should not assume that when their spouse or civil partner dies, they will automatically be entitled to everything. It is up to individuals to make sure that their wishes are respected by making a will.

‘My message to people is, don’t leave it to chance. Make sure your loved ones are properly provided for by leaving a will.’


Wednesday, September 10th, 2008

Good news regarding corporate tax reduction worldwide for the first time in 14 years, says KPMG report. This will not come as a surprise for most of our readers as in the UK we saw the reduction of its lower CT band some years ago to 21% and Spain to 25%.

The not so good news is that Governments continue looking at indirect tax on goods and services as the main source of revenue and those remain invariable.

A clear indication of the international economy outlook or just a casual coincidence? While corporations are looking at Corporation tax as a factor for potential emigration to most tax efficient jurisdictions, the Tax authorities re-focus their attention to tax on consumption.

The report is based on a 106 country survey showing that the global average corporate tax stands at 25.9%, been the lowest average in the European Union at 23.2% compared with Asia Pacific region at 28.4%.

Indirect Tax remains almost invariable at 15.1% average worldwide, been the EU the region with the highest rate.


Thursday, July 10th, 2008

The UK HM Revenue & Customs position on foreign subsidiaries appears to be out of touch with the current EU Tax Case Law.
The HMRC will appeal the High Court judgment of Vodafone using a Luxembourg subsidiary as a holding company for European investments. The argument been that interest generated in Luxembourg should be taxable in the UK.

This reasoning goes against the European Court of Justice position in the “Cadbury Schweppes plc & Cadbury Schweppes Overseas Ltd v Commissioners of Inland Revenue” case where it has been clearly established that domestic tax rules, such as UK CFC, can not prevent a company to organize its business affairs in another EU state directly or indirectly. In this case the UK tax rules penalize a more advantageous tax position which could be achieved by legitimately setting a company in Luxembourg.
We trust the Court of Appeal in the next instance or ultimately the House of Lords, will put an end to this trend that does not benefit the trade between UK and other EU states.

As Ralph Cunningham from the International Tax Review explains:
“The UK tax authorities will press on with defending the country’s controlled foreign company rules even though a High Court judge decided on July 4 that they should be scrapped in their current form.

HM Revenue & Customs (HMRC) has said it will appeal a High Court judgement that it should end its enquiry into Vodafone’s use of Luxembourg subsidiary as a holding company for European investments.

The tax authorities have been battling with Vodafone since 2002 over Vodafone Investments Luxembourg Sarl, which the mobile telecommunications company set up two years earlier.

HMRC claimed that the UK’s CFC legislation meant that the interest on money the Luxembourg company lent to German subsidiaries was taxable in the UK.

Vodafone argued that as the European Court of Justice (ECJ) had ruled in the Cadbury Schweppes case in 2006 that a taxpayer could set up a subsidiariy in any part of the EU as long it wasn’t only for ‘wholly articifial’ tax reasons, this meant the UK’s CFC rules were unenforceable. The ECJ said it was up to the UK courts to decide if the CFC rules applied only to subsidiaries which were established in other member states to avoid tax.

The UK Special Commissioners ruled in July last year that they could only consider the motive test in the CFC legislation in cases such as Vodafone’s. The motive test requires a UK taxpayer to show it didn’t set up a CFC to divert profits from the UK and that it didn’t use a CFC in transactions to reduce the amount of UK tax it would have to pay. The case has been to the Court of Appeal and the Special Commissioners before.

The CFC rules target subsidiaries that have been set up outside the UK in countries with a lower rate of tax and where the subsidiary pays less than three quarters of the amount of the tax it would have paid if it had been resident in the UK.

Justice Evans-Lombe said in the High Court that he didn’t believe the CFC rules complied with the freedom of establishment principle because it was clear that Vodafone could set up a CFC in another member state and that Cadbury Schweppes showed that the UK tax authorities were interfering with that right by trying to tax its profits; that the CFC rules were aimed at using CFCs to avoid tax, but Cadbury-Schweppes showed that taxpayer could set up such a company to obtain a tax advantage as long as it wasn’t established to only save tax.

The judge said only adding words to the CFC rules could make them comply with the freedom of establishment principle.

“It is to me a surprising proposition that the court can, by judicial legislation, add a further condition for the application of Section 748(3) in order to cure the invalidity of a statutory provision that would not otherwise comply with European law and be enforceable against certain taxpayers.

“The CFC legislation, which depends on Section 747 and Section 748 for its effectiveness, must be disapplied so that, pending such amending legislation or executive action, no charge can be imposed on a company such as Vodafone under the CFC legislation,” the judge concluded. “It follows that HMRC’s enquiry into Vodafone’s tax return for the Accounting Period has no legitimate purpose and should be closed.”

Though many tax professionals described the judgement as comprehensive, HMRC is not giving up the case.

“HMRC intends to appeal this decision, and the Government will continue to defend its ability to enforce the CFC rules, which are designed to counter tax avoidance through artificial shifting of profits to offshore subsidiaries,” it said. The next stop is the Court of Appeal with the House of Lords a possibility after that. An application to refer the case to the ECJ was withdrawn in the Special Commissioners.

The ruling puts more pressure on the government to come up with a plan for the taxation of foreign profits that is acceptable under EU law and to taxpayers. The Treasury published a discussion document on the issue in June 2007 that proposed a tax exemption for foreign dividends but also a new controlled companies regime that some taxpayers described as “draconian”. …”

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