Effective date for CGT, VAT on pre-registration assets, New deemed domicile rules

Last week we drew a lesson from an accountant who should have known the law when advising a client about CGT. HMRC has back-tracked on claims for repayment of VAT relating to assets acquired before registration. Also, just in case your American clients are thinking of staying the UK, we have a brief review of the changes to the deemed domicile rules from April 2017.

This is an extract from our topical tax tips newsletter dated 10 November 2016 (5 days before we publish an extract on this blog). You can obtain future issues by registering here>>>

New deemed domicile rules

All the rules you know about domicile and deemed domicile for UK tax purposes will be rewritten with effect from 6 April 2017. The new law will extend the deemed domicile treatment to all UK taxes, not just IHT.

UK residents who enjoy non-dom status will be deemed to be UK domiciled, if they have lived in the UK for at least 15 of the preceding 20 tax years. Also any UK residents who were born in the UK with a UK domicile (former domiciled resident or FDR), but have chosen to adopt a foreign domicile, will have their domicile of choice ignored for tax purposes. Those FDR taxpayers are treated as UK domiciled from 6 April 2017 however long they have been UK tax-resident.

These changes mean the remittance basis will no longer be available to many people who live in the UK, so those individuals will be taxed on all their worldwide income and gains, whether or not the offshore funds are remitted to the UK. The remittance basis remains (and doesn't have to be claimed) for individuals with less than £2,000 per year of unremitted foreign income or gains.

The years to count for the 15/20 test are all years of UK residence, including split years and years when the individual was aged under 18. To shake off the deemed domicile treatment for income tax and CGT the taxpayer will have to become non-resident for six entire tax years. However, only four tax years of non-residence will be required to shift deemed domicile for IHT purposes.

You need to talk to all your non-domiciled clients about these changes as soon as possible, as transactions undertaken before 6 April 2107 could undermine transitional reliefs available from that date. Our expat taxation experts can help you understand the implications for your clients.

This is an extract from our topical tax tips newsletter dated 10 November 2016 (5 days before we publish an extract on this blog). You can obtain future issues by registering here>>>

The full newsletter contained the remainder of this item plus links to related source material and the other two topical, timely and commercial tax tips. We've been publishing this newsletter weekly since 2007; it's clearly written and focused on precisely what accountants in general practice need to know about each week. You can obtain future issues by registering here>>>

Simple assessments, NI for offshore workers, Professional conduct

Every week we endeavour to find three practical tax points which are relevant to your practice. This week we have uncovered a new form of tax assessment which can be issued for 2016/17 onwards, and changes to the NIC regulations for overseas and offshore workers. We also alert you to a new version of the tax advisers' code of conduct: Professional Conduct in Relation to Taxation (PCRT).

This is an extract from our topical tax tips newsletter dated 3 November 2016 (5 days before we publish an extract on this blog). You can obtain future issues by registering here>>>

Simple assessments 

Do you remember how personal tax worked before self-assessment? The Inland Revenue would raise an estimated tax assessment; the taxpayer would appeal, a taxreturn would be submitted and eventually the figures would be agreed, then the taxwould be paid. HMRC seem to have turned the clock back to pre-SA days with a new power to raise 'simple assessments', from 15 September 2016 (FA 2016, Sch 23, s 167). 

A simple assessment is made by HMRC not by the taxpayer, so it is the opposite of a self-assessment made alongside a SA tax return. HMRC can raise a simple assessment when it has information that the taxpayer has received income or gains which are not taxed under PAYE, but that taxpayer hasn't submitted a SA tax return for the year, and is not due to submit a SA tax return. 

HMRC envisage that simple assessments will be used where the taxpayer's main source of income is taxed under PAYE, but he also has up to £10,000 of other taxable income or gains. This income threshold is not set in the legislation. 

The taxpayer will have 60 days to query the simple assessment or such longer period as HMRC allow. The tax due will be payable by 31 January after the tax year end, or if the simple assessment is issued after 31 October following the tax year, the tax will be payable three months after the date of the assessment. The taxpayer will not have to make payments on account after receiving a simple assessment, as would be the case when making a SA tax return. 

It is likely that any explanation of the tax demanded on a simple assessment will only be available in the taxpayer's personal digital tax account, which you may not have access to. There is no guidance available from HMRC about how simple assessments will work in practice, but HMRC does have the power to raise them for 2016/17 and later years. 

If you come across a simple assessment, do contact one of our personal tax experts for guidance.

This is an extract from our topical tax tips newsletter dated 3 November 2016 (5 days before we publish an extract on this blog). You can obtain future issues by registering here>>>

The full newsletter contained the remainder of this item plus links to related source material and the other two topical, timely and commercial tax tips. We've been publishing this newsletter weekly since 2007; it's clearly written and focused on precisely what accountants in general practice need to know about each week. You can obtain future issues by registering here>>>

Trivial benefits, VAT on market stalls, Taxable employee expenses

There are many influences which add to the constant changes for the UK tax system, but the top three are; new tax legislation, rulings in tax cases, and alterations in HMRC practice. We had examples of each of these last week; new rules about trivial benefits enacted by FA 2016, VAT treatment of market stalls decided by an Upper Tax Tribunal, and changes to the P11D proceeds effective from 6 April 2016.

This is an extract from our topical tax tips newsletter dated 27 October 2016 (5 days before we publish an extract on this blog). You can obtain future issues by registering here>>>

Trivial benefits 

For years HMRC has applied a concessionary tax exemption for trivial benefits provided by employers to their employees. This exemption has been given statutory backing in ITEPA 2003, ss 323A-323C, introduced by FA 2016, s 13 with effect from 6 April 2016. 

The new rules are actually very generous. The employer can provide a trivial benefit to any employee without having to justify his reason, on as many days in a tax year as he wishes, although there is a cap on the value of benefits provided to close company directors and their families (see below). 

If the benefit meets the following three conditions it can be paid with no tax or NIC for employee or employer, and business can claim tax deduction for the cost. The benefit must: 

a) cost no more than £50; 

b) not be a reward for services or in any way contractual; and 

c) not be cash or voucher which can be exchanged for cash. 

In theory the employer could provide a £50 gift voucher to every employee on every working day of the year, but that is likely to be seen as a reward for services, so it would break condition b) above. 

HMRC have provided some detailed guidance on these new rules which includes examples of the wide range of situations in which the trivial benefit exemption can be used. It is certainly worth reading to help answer clients' questions in this area. 

Directors and office-holders of close companies are only permitted to receive up to £300 of trivial benefits per tax year. That total includes the value of trivial benefits provided to the director's family members. This allows the company to buy six £50 gift vouchers to give to the director/shareholder at intervals (they must be separate gifts), who is then free to spend or distribute those gift vouchers as he wishes.

This is an extract from our topical tax tips newsletter dated 27 October 2016 (5 days before we publish an extract on this blog). You can obtain future issues by registering here>>>

The full newsletter contained the remainder of this item plus links to related source material and the other two topical, timely and commercial tax tips. We've been publishing this newsletter weekly since 2007; it's clearly written and focused on precisely what accountants in general practice need to know about each week. You can obtain future issues by registering here>>>