UK Non Doms subject to HMRC scrutiny

HMRC action

The UK still provides significant UK tax mitigation strategies for overseas income sources where you are tax resident here, but not UK domiciled (Non Dom). HMRC are looking very closely at this group of individuals and have recently issued “Nudge letters” asking them if they are confident their tax liabilities have been reported correctly, particularly targeting those who have been resident in the UK for a number of years.

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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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What came of Tax Day 2021?

The Treasury and Chancellor previously suggested that more effective tax changes would be introduced after undertaking consultation and seeking comment on the output from such consultation exercises. Therefore, instead of this being lost in the Budget Announcement a separate date, Tax Day, was set for the consultation announcements to be delivered – 23 March 21.

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Working overseas – are you aware of your Corporate Tax obligations?

Despite the global mobility issues Covid-19 has caused during 2020, UK companies have still been presented with opportunities to work overseas. In particular, we have seen UK clients working in Norway, Denmark, Germany, UAE, Saudi and Taiwan, just to name a few. When any work is undertaken in an overseas territory, it is important to remember that UK companies must remain compliant with the local tax laws and any resultant filing obligations, in addition to their UK tax obligations. Additionally, it is evident that overseas authorities are actively seeking to ensure that non-resident companies are compliant, paying the required taxes due, and filing the necessary returns by monitoring their days spent in country. Some authorities are more advanced, like Norway who have a dedicated tracking system.

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Withholding Tax – implications following Brexit

For any companies who previously relied on an EU directive in relation to Withholding Tax (“WHT”), there will be a need to consider the impact between the UK and other EU entities. The terms of the relevant Double Tax Treaty (“DTT”) should be reviewed to determine if there is any reduction, or possibly even elimination, of the withholding tax obligation. There may also be a requirement to make a new or amended claim to the relevant tax authority too.

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Working on Windfarms

As the world reduces its reliance on fossil fuels, there becomes an ever-increased demand for energy that is derived from renewable sources. One sector we have seen a significant increase in businesses working in is the offshore windfarm industry including both the operation of windfarms and the provision of services to allow these windfarms to operate. The increase in offshore windfarms is a global theme with many countries moving away from traditional energy sources and looking for a more sustainable supply.

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Corporate Tax Filing Extensions for the North Sea

Following on from our blog on 15 April 2020 which covered various COVID-19 related measures being made by overseas jurisdictions with regards the postponement of Corporate Tax filing deadlines, in the last few weeks we have seen further updates from overseas tax authorities in regard to extensions for filings and payments. In particular, Norway and Denmark have updated their deadlines in response to the COVID-19 pandemic.

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COVID-19 International Corporate Tax Filings and Payment Extensions

As COVID-19 continues to have an impact across the globe and on the economy, it is also having an impact on completion of work within the usual deadlines. As companies are focusing on operational aspects of business, Corporate Tax Return filing deadlines and payments may not be at the forefront. Many tax authorities across the globe are starting to recognise the challenges of meeting ‘normal’ deadlines and have issued guidance on Corporate Tax filing and payment extensions. Outlined below are just a few examples of the changes made by selected countries already and these are being updated daily.

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Working in Norway & Denmark – Are you aware of your Corporate Tax Obligations?

During 2019 we have seen that Norway and Denmark continue to be attractive work locations for UK companies. UK companies who are working in Norway and Denmark continue to specialise in the traditional sectors of oil and gas but we have also seen an upsurge in other sectors such as renewables, aquaculture and agriculture. It is important to emphasise that UK companies who are working in Norway and Denmark and any other overseas territory must remain compliant with the local tax laws. With the increase of foreign companies working in these territories, the Norwegian and Danish authorities are actively seeking to ensure that these companies are compliant by paying the required taxes due and filing the correct returns.  

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Tax Challenges (and Opportunities!) for UK Corporates

Over the years the UK has continued to drive towards a more competitive Corporate Tax (CT) regime. This has been achieved by various means, including lowering the headline rate to 17% from April 2020, which will be amongst the lowest rates of the G20 countries.  Compare this to a rate of 28% from a decade ago, it is encouraging for foreign investors! In addition, the UK has generous tax incentives to encourage UK innovation in the form of Research & Development and Patent Box Relief. There have also been changes in the legislation designed to encourage utilising the UK as a “Holding Company” location, including some relaxations to the Substantial Shareholdings Exemption (SSE) legislation which in many cases now makes it easier for UK Holding companies to obtain CT relief when selling subsidiaries, and other investments.

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