HMRC seek views on closing the “International Tax Gap”

Statistics suggest that the UK tax gap, ie the difference between the amount of tax that should, in theory, be paid to HMRC, and what is actually paid, fell to the lowest rate on record for the 2018/19 tax year @ 4.7%. This is a major achievement for HMRC and reflects investments made in automating many administrative systems to make it as easy as possible for taxpayers to pay the right tax, at the right time. It also reflects their success acting against those who have sought to deliberately evade their Offshore tax obligations. More than £3 bn has been secured by the UK Government since 2010, just from initiatives that focused on Offshore non- compliance.

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Non residents investing in UK property – Stamp Duty Land Tax versus Land and Buildings Transaction Tax

The budget on 3rd March created further differences in tax charges when acquiring land and property, widening the very clear gap between rates of Stamp Duty Land Tax (SDLT) applying in England, compared with Land and Buildings Transaction Tax (LBTT) applying in Scotland.

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BNO status and considering a move from Hong Kong to the UK?

Moving to the UK from Hong Kong ? – British National Overseas (BNO) Status allows for new UK Visa applications, but UK Tax Advice and support should form part of an essential “to do “list..

Hundreds of thousands of Hong Kong individuals are expected to emigrate in the next few years, as the Chinese Government continues to restrict long held freedoms in the city, originally provided for under British Colonial rule until 1997. Many are completely disillusioned with the current political climate, Beijing consistently introducing measures that are clearly intended to move further away from democracy and which now include restrictions on freedom of speech.

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Relocating from or to the US? Here are the key tax situations to be aware of

Individuals relocating from, or to the US can face particularly challenging tax situations when compared to other jurisdictions, not least dual reporting requirements and very conflicting approaches to taxing the same sources of income or gains.

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Moving Overseas to Save Tax? This could be more taxing than you think…

After weeks of lockdown, and searching for some much needed escape from COVID news, I came across BBC 2’s latest documentary Inside Monaco: Playground of the Rich”. It allowed for a fascinating insight into this country which has extraordinary wealth, attracting the super rich from across the world.  

Monaco has much to offer these individuals, not least a beautiful Marina to park your luxury yacht, but let’s be honest, in most cases, they choose to live there because it has a zero tax policy, and so if they are resident, they don’t have to pay any income tax.  

It’s worth saying however, that for many individuals looking to reduce tax on their global income, successfully securing tax residence in one jurisdiction, and shaking off residence in another, is unlikely to be quite so simple as getting on a plane and flying into the new country.  

To be, or not to be… Tax Resident 

Focusing on the UK, being a tax resident here will automatically result in worldwide income and gains becoming subject to UK tax, no matter where this is held, and irrespective of this being paid to the UK. This is the default position, and whilst non UK domiciled individuals may claim exemption on unremitted overseas sources, this is not automatic, must be formally claimed, and can impact other allowances. Domicile is usually connected to the country your father considered his permanent home where you were born.

HMRC have definitive tests to determine if someone remains resident in the UK, and this is not just about spending less than 183 days in the UK. If you have a UK home, and spend more than 30 nights there (without spending a similar number of nights in an overseas home), or spend as few as 16 days in the UK when you continue to have ties/connections here, you could potentially be seen as UK tax resident, even if you spend more of your time overseas in any tax year.  

When leaving or coming back to the UK, it is possible to split the tax year into a UK and overseas part, but again HMRC’s qualifying criteria means this isn’t a “slam dunk”, and the legislation must be carefully applied to each individual’s particular circumstances. 

Different Rules for Different Taxes  

Generally non UK residence allows you to  remove overseas income and gains from the UK tax charge, but if you do not also achieve 5 years outside the UK, the “Temporary Non Residence Rules” allows HMRC to tax certain sources of income, and gains on assets sold that were held prior to leaving the UK. 

Liability to UK Capital Gains Tax (CGT) on sales of UK land and property applies, even if non UK resident, and even if owned via a company or trust. Plus sales must also be reported to HMRC within 30 days. 

Inheritance Tax (IHT) is linked to your domicile. You could therefore find yourself fully liable to UK IHT, even if non UK resident and no assets are held in the UK. 

Tax Treaties  

It’s also important to consider not just domestic tax legislation, but the Treaties in place between jurisdictions involved. Taxing rights detailed within these Treaties could override domestic tax law.  

Global Transparency 

The OECD’s Common Reporting Standard Initiative (CRS) has resulted in over 100 countries exchanging financial information, including 47M offshore accounts, worth some $4.9 Trillion.   

As a result, Tax authorities across the world have chosen to introduce severe penalty regimes to those who continue to flout tax reporting requirements, and so it is more important than ever before to ensure your global tax affairs are reported correctly. 

If you are relocating, whether that be with the aim of saving tax or otherwise, then given the complexities involved, we would recommend speaking with specialist tax advisors to guide you through the process.

At AAB we have extensive experience and specialist global tax expertise to help you and ensure that your tax affairs are 100% correct. For more information please contact Lynn Gracie, Head of International Private Client Tax or your usual AAB contact. 

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HMRC Nudge Letters for Overseas Income – another batch issued in July 2020

HMRC’s very own “tax gift that just keeps giving”…

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British Expats Beware – HMRC are coming…

Big Brother

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Offshore Assets, income or gains …any undisclosed tax liabilities?  HMRC offer ‘Time To Pay arrangements’ during COVID-19 pandemic

As we have documented in earlier blogs (captured below), ownership details of offshore assets, income and gains have been directly provided to HMRC, via exchange of information agreements with hundreds of overseas countries in the last 2 years. HMRC now have access to unprecedented amounts of information relating to overseas details for UK resident individuals, including undisclosed tax liabilities.

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COVID-19 – Skilled frontline foreign workers receive temporary tax concession

These are unprecedented times, and we all know the NHS is under enormous pressure. NHS staff in particular are on the front line of this fight against COVID-19, and many have come to the UK from overseas to work or train here, providing us with much needed skills and support across the NHS. I’m sure everyone will have heard Boris Johnston’s heartfelt thank you to the dedicated nurses who took great care of him, both of whom came from overseas. Those same nurses, and indeed the rest of the NHS community, also rely on access to first class and appropriate medical equipment which can only be delivered with the help of skilled engineering expertise and resources.

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Non-UK Resident and worried about extended days in the UK? – HMRC issue welcome concession due to COVID-19

HMRC have now updated their guidance acknowledging the COVID-19 pandemic may well impact individuals ability to move freely to and from the UK, or require them to remain unexpectedly in the UK.

As mentioned in our recent post, HMRC agree that where presence in the UK is due to “Exceptional Circumstances”, ie beyond that individual’s control, then those days (up to a maximum of 60 days), can be ignored for the purpose of the statutory residence tests. This definition is construed strictly by HMRC and their guidance acknowledges this would include local or national emergencies, such as civil unrest, natural disasters, the outbreak of war or sudden serious or life-threatening illness or injury.

It also confirms Foreign and Commonwealth Office advice to avoid all but essential travel would count, and this advice was indeed updated on 18 March as follows:

“The FCO now advises British people against all non-essential travel worldwide. This advice takes effect immediately and applies initially for a period of 30 days”

HMRC’s updated guidance has almost certainly been issued because of the new FCO advice, and they go on to confirm that where an individual:

  • is quarantined or advised by a health professional or public health guidance to self-isolate in the UK as a result of the virus
  • find themselves advised by official Government advice not to travel from the UK as a result of the virus
  • are unable to leave the UK as a result of the closure of international borders, or
  • are asked by their employer to return to the UK temporarily as a result of the virus

then these circumstances are considered as “Exceptional”.

HMRC will always consider the fact of each case, and we would always recommend that evidence of travel restrictions should be retained by anyone affected, particularly employees, who may have been asked to return to the UK, and either told by their employer not to travel back to their place of work overseas, or are now simply unable to travel anywhere out of the UK because of the new FCO advice.

It’s important to note that there is no mention of the 60 day limit for Exceptional Circumstances being increased, but at least this provides some relief for many who, through no fault of their own, are now unable to leave the UK.

If you are affected by any of the above or would like any further information please contact Lynn Gracie, Natalie Butler or your usual AAB contact.

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