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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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