H M Revenue & Customs have confirmed that due to planned industrial action the filing and payment deadline for Self Assessment Tax Returns for the year ended 5 April 2011 has effectively been moved to midnight on 2 February 2012.
Any Tax Returns and payments received after the original deadline of 31 January 2012 but before 3 February 2012 will not be subject to the automatic £100 late filing penalty, nor will interest be charged.
Disclosure opportunities are all the rage at the moment. Obviously, they’re popular with HMRC because their limited resources don’t allow them to investigate every wrongdoer but what they do have is extended information gathering powers and the ability to assess under declarations of tax going back up to 20 years if they consider that the taxpayer has acted deliberately.
With this threat hanging over clients, the urge to unburden themselves of the guilt is understandable. After all, leaving aside lottery winners, most people have to sweat blood to accumulate a reasonable level of wealth and the prospect of HMRC taking a significant proportion (if not all) of that away following an enquiry is a recipe for sleepless nights and undue stress.
However, HMRC has the answer to this problem –why not unburden your soul (and your bank balance) now and wipe the slate clean with a voluntary disclosure?
HMRC’s problem is that they have more information than they can effectively deal with, so the impetus to use that information in an efficient way in order to avoid having to mount costly investigations, whilst the information is current, must be significant.
From 31 January 2012, HMRC will be contacting people they suspect of serious tax fraud to offer them the opportunity to take advantage of the Civil Investigation of Fraud procedures by entering into a contract with HMRC to disclose the fraud within 60days. There are very few positives to receiving such a letter but one of them is that, in return for a full disclosure, HMRC will not undertake a criminal investigation with a view to prosecution.
This is a natural progression of the way that all HMRC enquiries are evolving i.e.
placing more of the compliance burden and cost on the taxpayer as opposed to the public purse. Those clients who do have something to hide would be well advised to make the disclosure as HMRC’s press release promises a full investigation and, in some cases criminal prosecution.
It also invites clients to consider a voluntary disclosure using the same contract to disclose the fraud and with the same conditional immunity from prosecution. We have yet to establish the quality of the information HMRC holds in each of these cases but what is always of paramount importance in such cases is the need to analyse the information calmly and objectively before deciding whether to accede to HMRC’s request for a disclosure. After all, HMRC’s information may be inaccurate and any disclosure should be looked at with a view to establishing whether the client’s actions could be construed as innocent error or carelessness rather than deliberate action. In such cases the potential penalty loading can be reduced substantially.
Note: this is a reprint of an article prepared by CCH who underwrite the Premier Fee Protection Service which is offered to all our clients.
For further information, please contact Geoff Adams
Currently H M Revenue & Customs (HMRC) regard a foreign currency account as an asset for capital gains tax purposes. Therefore any withdrawal is a part disposal from which a capital gain or loss can have arisen, due to the changes in currency exchange rates.
From April 2012 this will no longer apply and gains will no longer be chargeable, and losses will no longer be relievable by individuals, trustees and personal representatives of deceased persons.
In a statement released yesterday the Government has announced that the Statutory Residence Test (STaRT) should now come into affect from April 2013, and not April 2012 as original planned.
Therefore in order to determine an Individual’s UK residency position we must continue to refer to H M Revenue & Customs (HMRC) guidance in the form of HMRC6 and case law.
Under current guidance an individual may break residence with the UK by leaving through a settled purpose or by full time employment abroad.
In order to break residence through full time employment abroad, the individual must be in a full time contract of employment overseas for at least one complete tax year and keep days in the UK to below 91 on average, when looked at over a maximum of a 4 year period.
When an individual returns to the UK, incidental duties may be performed in the UK without them affecting ones residence position or without the days being subject to UK taxation. HMRC also confirmed a number of months ago that if an individual performed less than 10 days of substantial duties in the UK, it would not affect their residence position, but tax should be paid on those duties.
This is quite different from the proposals under STaRT as it was thought that the meaning of incidental duties would be scrapped. It had been proposed that an individual could work no more than 20 days (a day being more than 3 hours of work) in the UK, including incidental and substantial duties, without it affecting there residency status where they had left the UK for full time work abroad.
If you have concerns that with the delayed and still uncertain introduction of STaRT you may not be able to break residence with the UK or would like to discuss this further, please contact me.
The reform of Non Domiciled Individuals, as proposed in June 2011, received draft legislation to have effect from April 2012. The main changes are as follows;
Increased remittance basis charge
From the tax year commencing 6 April 2012, non UK domiciled individuals who have been UK resident for any 12 of the preceding 14 tax years, and who are taxed on the remittance basis of taxation, will be subject to an increased remittance basis charge of £50,000 per annum.
For those non UK domiciled individuals where the above does not apply, and they have been UK resident for any 7 out of the 9 preceding tax years the £30,000 annual remittance basis charge will continue to apply, where the remittance basis is claimed.
It will continue to be the case that where an individual is under 18, or the individual’s unremitted non UK income or gains is below £2,000 the above charges will not apply.
Encouraging Business Investment
From 6 April 2012 non UK domiciled individuals will be able to remit non UK income and gains to the UK, without a tax charge arising, where the funds have been remitted for the purpose of a qualifying investment.
A qualifying investment for this purpose is where shares are issued to that individual or the individual makes a loan to an eligible trading or eligible stakeholder company.
For the purpose of this legislation, the following is defined;
• Eligible trading company; a private limited company, that carries on, or is preparing to do so within the next 2 years a commercial trade, and where the commercial trade is all or is substantially all of what it does.
• Eligible stakeholder company; a private limited which invests only in eligible trading companies or must be preparing to do so within the next 2 years.
• A private limited company is a corporate body, which is not a limited liability partnership and which is not listed on a recognised stock exchange.
A further qualifying element is that the individual must not obtain or be entitled to obtain a benefit from making the investment, which they would not ordinarily be entitled to in the ordinary course of business and on arms length terms.
Once the investment has been made, the remitted non UK income or gains can later be brought into charge. This will arise where one of the qualifying conditions above are no longer met, or failed to be met, where the investment is sold or where money or a benefit is extracted from the company.
Money or benefits are not counted for this purpose if it is paid or provided in the ordinary course of business or is subject to tax as income.
In order to prevent the originally remitted funds being subject to tax the individual will have 45 days to transfer the funds offshore. From what date is dependant on why the income or gains have been brought into charge.
Nominated Income
For non domiciled individuals who are subject to a remittance basis charge, non UK income or gains are nominated to serve as the income on which the tax is due, however in practise non UK income of £1 is often declared. Currently if any of the nominated income is remitted to the UK, complicated remittance ordering rules for all non UK accounts are activated. From 6 April 2012, if less than £10 of nominated income is remitted to the UK these rules will no longer apply.
The current position is that there is no minimum amount of funds invested in relevant property to qualify for the Liechtenstein Disclosure Facility (LDF). Liechtenstein Financial Intermediaries (LFI’s) are expected to apply minimum investment levels or other qualifying terms and HMRC reserves its position to ask to see documentary evidence of the relevant property.
With effect from 1 December 2011, LFI’s will issue a Conformation of Relevance certificate to investors seeking to qualify for the LDF. HMRC will require sight of that certificate before an LDF registration application can be accepted.
Further details will shortly appear on the HMRC website but, in the meantime and for any help or advice about the LDF, please contact geoff.adams@britishtaxpayers.com or call our confidential helpline on 0906 571 5419 (calls cost 150p a minute from a BT landline).
HMRC have created 5 new taskforces to combat tax evasion in different trading sectors, and another 7 will be formed by the end of 2012. The latest targets are restaurants, scrap-metal dealers, construction businesses and landlords with three or more properties.
Now that the UK/Swiss tax deal has been signed and HMRC are greatly increasing their investigative efforts, you ought to consider seriously the options for your Swiss bank accounts. These are:
1: Close your Swiss accounts;
2: Keep your money in Switzerland and elect to disclose anonymously;
3: Allow the bank to release your name to HMRC and face a possible investigation;
4: Elect to disclose through the LDF.
For help and advice on which option to choose, contact geoff.adams@britishtaxpayers.com for a confidential discussion.
After a long-running legal battle, Robert Gaines-Cooper has finally lost his tax residence battle against HMRC in the Supreme Court.
Anecdotal evidence suggests that HMRC will use the ruling as justification to seek back taxes from thousands of British expats who have claimed non resident status even they have kept a home and/or their family in the UK.
The tax position for many expats is already under threat following the recent publication of the proposed rules for the new Statutory Residence Test which comes into force on 6 April 2012.
For further information, please contact Claire Spinks (claire.spinks@britishtaxpayers.com)
On 6 October, the full agreement between the UK and Swiss governments was published. This agreement will require UK residents with Swiss accounts and other bankable assets either to disclose them to HMRC – or to suffer a withholding tax on the capital value of the account in order to satisfy past tax liabilities as well as withholding tax on income and realised gains after 31 December 2012. For further information, please contact Geoff Adams (geoff.adams@britishtaxpayers.com)