Today’s Budget saw the publication over a hundred Budget notes, press pelease and other documents. One of these supplementary documents relates to the taxation of Furnished Holiday Lettings (FHL).

Currently, let properties in the UK, which fulfil the conditions, attract a beneficial tax treatment which means that the profits are counted as earnings for pension purposes and losses can be offset against other income.

The Government believes that the fact that this treatment is given to UK properties may not be compliant with European Law and so have decided that this should be repealed with effect from 2010/2011.

The good news is that the beneficial treatment should be extended to properties within the European Economic Area (EEA) until it is repealed. This means that that it is possible to submit amended tax returns and claim refunds in some cases.

• Returns that are still within the normal time limit for amendment can be made within that time limit.
• HMRC will also accept late amendments to personal tax returns for 2006/2007 and corporation tax returns for periods ending after 31 December 2006.

The deadline for making a late amendment is 31 July 2009.

Comment on this blog in the space provided below. Barry Hallam is a Senior Tax Manager at Mercer & Hole. 

• Email This
• Print
• Comments (4)
• Share Link
• Mercer Hole Homepage
• Contact Us

With less than a week until Chancellor Alastair Darling’s second Budget statement the speculation as to what may be announced on Wednesday 22 April 2009 is mounting.

Political  commentators such as www.politics.co.uk suggest that on one hand it should be a neutral Budget, but on the other hand spending is now part of the Government’s DNA. The British Retail Consortium (BRC), is reported in The Telegraph as saying that, “the high street is in need of some retail therapy”.

The Times reports that, “the Budget will make or break renewable energy” and the BBC is giving its own predictions here.

From a tax perspective much has already been announced in respect of the current tax year, but there may be changes announced for later years. Those dealing with the taxation of non-domiciled UK residents would welcome some simplification of the horrendously complex new rule introduced in Mr Darling’s first Budget last year. 

As usual, we will just have to wait and see! 

We will of course be blogging on SME Plus Blog and Tax Plus Blog, providing analysis on the key highlights next Wednesday.    

If you do not already subscribe to our blogs click here for SME Plus Blog or here for Tax Plus Blog to ensure you get our comment and analysis as and when it happens. 

• Email This
• Print
• Comments
• Share Link
• Mercer Hole Homepage
• Contact Us

HMRC have now published the promised detailed guidance on the taxation of Non Domiciled UK Residents and the Remittance Basis following the changes in last year’s Finance Act 2008. The guidance can be found on the HMRC Website and runs to over 400 pages. It is slightly disconcerting to note, from the introduction to one of the documents, that….

“….extra examples will be added to illustrate the working of the rules in less straightforward circumstances.”

So, we’ve just got the simple stuff for now!

It is expected that there will be some amendments to the rules announced in the forthcoming Budget.

We will be blogging on Tax Plus Blog and SME Plus Blog on Budget day.  If you do not already subscribe to our blogs click here for Tax Plus Blog or here for SME Plus Blog to ensure you get our comment and analysis as and when it happens.

• Email This
• Print
• Comments
• Share Link
• Mercer Hole Homepage
• Contact Us

In advance of this year’s Budget which is expected to make some changes to the complex new rules for Non Domiciled UK Resident individuals (Non Doms), HM Revenue & Customs (HMRC) have announced that most individuals who pay the £30,000 Remittance Basis Charge will be transferred to a specialist office in Nottingham.

HMRC have also announced that they will no longer process Forms DOM1 (withdrawn) or P86 (to be replaced without the domicile questions) which are designed to provide a “ruling” on an individual’s domicile status. In future it is entirely up to an individual to decide their own domicile status when submitting their Self Assessment tax return and HMRC will be able to challenge this via the normal enquiry process. It appears that HMRC may be looking closely at individuals who have lived in the UK for a number of years but still claim to be a Non Dom even though HMRC gave a “ruling” previously. Their website states:

“For example if an individual had advised HMRC on their arrival in England a decade or so ago that they planned to leave the UK after five years but had since married, had a family and decided to make England their permanent home then they will have adopted a domicile of choice within the UK.”

They have also stated that even where a claim for the remittance basis has not been challenged for a particular year

“…..it does not mean HMRC necessarily accepts the individual’s domicile is outside the UK and does not prevent HMRC from later opening an enquiry to consider the domicile status of the individual in relation to that, or any earlier year. “

It is now more important than ever that adequate disclosure is made on the Self Assessment Tax Return to ensure a fighting chance against any challenge by HMRC.

HMRC have promised more detailed guidance “soon” – watch this space

We will be blogging on SME Plus Blog and Tax Plus Blog on Budget day.  If you do not already subscribe to our blogs click here for SME Plus Blog or here for Tax Plus Blog to ensure you get our comment and analysis as and when it happens.

• Email This
• Print
• Comments (2)
• Share Link
• Mercer Hole Homepage
• Contact Us

The Chancellor will make his Budget statement on Wednesday 22 April 2009.  We will be providing analysis of Budget announcements on the day.
 

• Email This
• Print
• Comments
• Share Link
• Mercer Hole Homepage
• Contact Us

The Budget announcement today includes some welcome clarifications and relaxations on the extension of the offshore trust capital gains tax rules to non-UK domiciled individuals from 6 April 2008. The main points to note are that :

• Non-UK domiciled settlors will not be taxed on gains arising to offshore trusts under the “settlor charge”.
• Non-UK domiciled beneficiaries will not be subject to effective retrospective taxation on gains, or capital payments, arising before 6 April 2008. Offs
• hore trustees will be able to make an election to rebase assets to 6 April 2008 values so that gains accruing before that date will fall outside the charge to tax for non-UK domiciled beneficiaries.
• Offshore trust gains arising and matched with capital payments on or after 6 April 2008 will potentially be taxable on non-UK domiciled beneficiaries.
• Gains arising in respect of UK as well as non-UK assets can be taxed on the remittance basis.
• The requirement to provide detailed disclosure of information on offshore trusts to HMRC has in large part been dropped.
  

The changes clearly reflect many of the concerns raised during the consultation process on the draft legislation published in January and are perhaps more generous than expected. This does remove much of the pressure to take significant actions in respect of offshore trusts before 6 April 2008. However, specific advice should be sought in all cases.

• Email This
• Print
• Comments
• Share Link
• Mercer Hole Homepage
• Contact Us

It was previously announced that paying interest out of foreign income would be treated as a remittance with effect from 6 April 2008. Today’s Budget has relaxed this proposal in respect of existing mortgages.

Interest payments on existing mortgages, which are secured on a residential property in the UK, that are funded out of untaxed foreign income will not now be treated as a remittance. This will continue for the remaining period of the loan, or until 5 April 2028 whichever is shorter. If the terms of the loan or further advances are made after 12 March 2008 the grandfathering provisions will stop.

• Email This
• Print
• Comments
• Share Link
• Mercer Hole Homepage
• Contact Us

Currently Non-doms do not get the benefit of capital losses on foreign assets as the remittance basis is compulsory for capital gains tax. From 6 April 2008 it will be possible to elect in and out of the remittance basis on a year by year basis.

Legislation will be amended so that Non-doms who have not claimed the remittance basis from 2008/09 will get relief for foreign losses. Those non-doms who do claim the remittance basis will be able to elect into a regime that gives them relief for foreign losses in the UK in the years they are taxed on an arising basis. The election will be irrevocable and will require disclosure of unremitted capital gains.

• Email This
• Print
• Comments
• Share Link
• Mercer Hole Homepage
• Contact Us

Proposed changes to the tax rules for Non-Doms had meant that UK residents who took advantage of the remittance basis would lose personal allowances and annual capital gains tax exemptions where their unremitted foreign income and capital gains exceeded £1,000 a year.

Today’s Budget has relaxed this rule slightly and the limit has been increased to £2,000 a year.

• Email This
• Print
• Comments
• Share Link
• Mercer Hole Homepage
• Contact Us

There have a number of changes announced in today’s Budget to the proposed levy of £30,000 for taking advantage of the remittance basis.

The first change to note is that it will only apply to adults. Children will not have to pay the charge until the year in which they turn18. Secondly the de-minimis limit of £1,000 has been raised to £2,000.

The most significant change is that it will now a tax charge rather than a stand alone charge and, as a result, will be treated as such for the purposes of Double Taxation Agreements. This follows serious lobbying by the, particularly American, ex-pat community as it looked like US citizens would not get credit for the £30,000 against their US tax liability.

The charge will be attributed to unremitted income or gains (at the choice of the individual) and when these are eventually remitted to the UK they will not be taxed again. However there will be ordering rules that will ensure that untaxed unremitted foreign income and gains will be treated as remitted before income or gains upon which the £30,000 has been paid.

The £30,000 charge will also be available to cover Gift Aid donations.

• Email This
• Print
• Comments (6)
• Share Link
• Mercer Hole Homepage
• Contact Us

The main VAT changes announced in the Budget today are;

1. With effect from 1 April 2008, the annual VAT Registration/deregistration limits have
   increased to £67,000/£65,000 respectively. 
2. Revised fuel scale charges will apply for VAT return periods beginning after 1 May 2008.
3. A transitional period has been announced for VAT refund claims to 31 March 2009. This follows recent litigation relating to the three year capping rules introduced in 1996/7.
4. Withdrawal of the staff hire concession with effect from 1 April 2009.
5. A package of simplification measures for the option to tax.
6. Extension of the VAT exemption for fund management services.
7. The limits for correcting errors on VAT returns have increased from £2,000 to the greater of £10,000 and 1% of turnover.
   
   Full details of these changes will be contained in our Budget Tax Bulletin to be issued shortly.
   
   

• Email This
• Print
• Comments
• Share Link
• Mercer Hole Homepage
• Contact Us

Dividends paid by UK companies carry a non-repayable tax credit equivalent to one ninth of the dividend. This means that a basic rate taxpayer has nothing further to pay and a higher rate tax payer pays additional tax at an effective rate of 25%. Dividends from non-UK companies, however, do not currently carry a tax credit and so a basic rate taxpayer will be liable at 10% and a higher rate taxpayer will pay 32.5%.

It was previously announced that from 6 April 2008, provided the dividends did not exceed £5,000 a year, non-UK dividends would carry the same tax credit for shareholders who own less than 10% of the company. Today’s Budget announcement has removed the £5,000 limit. It is not clear what happens where foreign tax has been paid on the dividends.

In addition, the tax credit will be available, from 6 April 2009, for shareholders with more than 10% provided that the source country levies a tax on corporate profits similar to corporation tax. Further details can be found here.

Remittance basis

When the legislation relating to the taxation of overseas dividend was re-written in 2005 an error was made so that remitted dividends (for those claiming the remittance basis) were taxed at 32.5% rather than 40% as they had been in the past. Today’s Budget has announced that this will be corrected with effect from 6 April 2008. The Budget Notice can be found here.

• Email This
• Print
• Comments (3)
• Share Link
• Mercer Hole Homepage
• Contact Us

Today’s Budget has relaxed the proposed rules for counting the days spent in the UK when determining whether someone is resident in the UK for Tax purposes. It had previously been announced that days of arrival and departure would be counted.

Today’s announcement means that only days where the individual is present in the UK at midnight will be counted as a day of presence in the UK for residence tax purposes. That is days of arrival but not departure.

There is an additional exemption for passengers in transit between two places outside the UK even if they are here at midnight.

Further details can be found here.

• Email This
• Print
• Comments
• Share Link
• Mercer Hole Homepage
• Contact Us

Chancellor Alistair Darling will deliver his first full Budget on Wednesday 12 March 2008. The 2008 Budget comes amid the gloomiest economic situation for more than a decade, with volatile financial markets, a credit crunch and falling house prices.

Mr Darling will present the Budget to the House of Commons at 12.30pm and we will of course be blogging on SME Plus Blog and Tax Plus Blog during the course of the afternoon, providing analysis on the key highlights.

If you do not already subscribe to our blogs click here for SME Plus Blog or here for Tax Plus Blog to ensure you get our comment and analysis as and when it happens.

• Email This
• Print
• Comments
• Share Link
• Mercer Hole Homepage
• Contact Us