Posted on March 12, 2008 by Fernando Del Canto

Another happy budget for some UK non-dom?

The Chancellor’s announcement in today’s budget regarding non-doms will only please two categories of UK non-dom tax payers.

1.- Any non-dom making under £36k taxable in the UK and over £75k outside the UK (non remmitted income). I believe they will be delighted to pay the flat tax of £30k per year and  still keep their tax payable under the 40% income tax rate. For the group of people making over £167k outside the UK and not remmitting that income, the glorious UK will still remain as one of the lower tax jurisdictions in the EU, under OECD accepted standards. 

2.- The non dom tax payers who have been in the UK for only seven years will get one extra year’s grace prior to pay the  £30,000 tax charge. Today's budget suggests that the residency test before the charge will be extended to eight out of eleven years, rather than eight out of ten.


Regarding the 90 days-a-year residence rule, a day is now only counted from arrival in the UK at midnight. The general rule is that If a UK resident goes abroad permanently, he will be treated as remaining resident and ordinarily resident if his visits to the UK average 91 days or more a year.

Over the last budgets the announcements from the Chancellor are targeting the extended non-dom population in the UK and those emigrating from the UK. The question for me is how succesful has been the HMRC in terms of financial succes for the Treasure versus the havoc that is creating among the many non doms and expats that have been and still are contributing to the UK in terms of business and financial acccumen and intellectual capital. I invite comments on this one.

As the Financial Times published today, Deepak Malhotra, who advises South Asian clients for Grant Thornton said important concessions had been made on rules for remaining non-resident, as well as the non-dom tax regime.

“Non-dom clients will be more positive about things than before,” he said. “But it would have been better to consult first, rather than issue draconian proposals that upset a lot of people.”

Mr Malhotra thought the final proposals might help lift the uncertainty that has hung over non-dom taxation for many years, with proposals repeatedly aired and then shelved. “The promise of no further change in this parliament or the next should reassure businesses and individuals.”

Please see full article at FT web page
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Posted on February 24, 2008 by Fernando Del Canto

British Tax authorities pays for Briton's bank details

Today in the BBC it was revealed that the HMRC, the UK's tax authority has confirmed that it has paid an informant for data regarding British citizens who have accounts in tax haven Liechtenstein.

HM Revenue and Customs (HMRC) confirmed the move after a Sunday Times report, but would not say how much it had paid the informant. Read the article here

The suspected whistle blower, accused of stealing data from the bank, LGT,  was sacked and convicted of fraud.Mike Warburton, a partner at Grant Thornton at www.grantthornton.com  said: It is shocking that the Revenue has started buying information from dubious sources to help its investigations.

I have discussed this issue in this morning post OECD, Liechtenstein and Germany. Is there a place for a synthetic approach? and will welcome people's views.

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Posted on February 22, 2008 by Fernando Del Canto

Tax Freedom Day in the UK was 1st of June

Tax Freedom Day shows just how long the UK taxpayers spend working for the UK Treasury, rather than themselves.

The concept was developed by the Adam Smith Institute in the UK at http://www.adamsmith.org and shows that the UK residents work 5 months out of 12 for the Government.The Institute says that overall, the government takes more than 40% of national income in the UK. This amount is significantly lower that the EU average. In the USA, however, the government excises are lower, and this may be understandable historically by the strong opposition to governmental pressure.

The reality is that  most  UK residents have to work a full five months of the year solely to pay that tax bill. In 2006, that meant working from 1 January to 1 June – just to pay taxes! And the March 2007 budget did nothing to change that. Tax Freedom Day 2007 once again falls on 1 June. What will happen in 2008? I can not foresee taxation going any lower, and you?

For much of the last few years, however, Tax Freedom Day has been coming later and later. In fact, it falls a full week later now than it did back in 2002. That is an extra week of working for the Chancellor. At this rate, it will not be long until we spend longer working for the government than we do working for ourselves, which brings to the table some interesting historical reflections.

An interesting Book "Coffee planters, workers and wives: class conflict and gender relations on Sao Paulo plantations, 1850-1980" Macmillan Press, 1988, the evolution from slavery (room and board) toward share croppers concepts (50:50 after expenses) is discussed. An interesting reflection on tax and slavery is available at http://www.press.uchicago.edu/Misc/Chicago/194876.html

Tax Freedom Day is calculated by taking the UK's net national income and calculating how much of that is taken away in taxes. These taxes include not just income tax, but VAT, inheritance tax, stamp duty, car and fuel taxes, excise taxes on alcohol and cigarettes, taxes on companies and employment, and many more. For technical stuff about how Tax Freedom Day is calculated, click here. Tax Freedom Day varies around the country for a description of why and how much, click here.

The Adam Smith Institute has been calculating Tax Freedom Day since 1991 and has figures for it going back to 1963 – when Tax Freedom Day was more than a whole month earlier, falling on 24 April. There are also some international comparisons.

I do not endorse this approach to taxation as a political weapon, however it is an interesting tool to be able to reflect and discuss how much we contribute to the government and how they are using our funds.

The information posted here was taken from the Adam Smith Institute at http://www.adamsmith.org/tax-freedom-day/

 
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Posted on February 9, 2008 by Fernando Del Canto

Domicile and Residence potential changes in the UK

HM Revenue & Customs published PBRN 18 and as whe have seen in previous years when the domicile or residence rules are threatened by the HMRC,  a significant ammount of noise is generated in the accounting profession.

Some of my UK non resident clients living in Spain raised their concerns with this legislation. A very good discussion can be found in Lisa Spearman's Tax plus blog 

The main discussion is who is likely to be affected?

The answer is, UK residents paying tax on the remittance basis and non-resident individuals who spend a significant amount of time in the UK.

General description of the measure

Legislation will be introduced in Finance Bill 2008 to:

• Introduce an additional tax charge for individuals using the remittance basis of taxation;
• End the automatic entitlement to certain personal allowances for individuals resident in the UK who are using the remittance basis;
• Ensure that when determining if an individual is resident in the UK in any year, days of arrival and departure are counted; and
• Address a range of anomalies in the remittance basis.

The remittance basis of taxation can apply to those UK residents who are not domiciled in the UK or who are not ordinarily resident in the UK. The remittance basis provides that such residents will be taxed on foreign income and gains only when they are remitted to the UK.
Operative date

All these changes will apply on or after 6 April 2008.
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