Tax News
December 2009/January 2010
Swinford tax haven for sale
“Offshore? No, Oxfordshire” is how The Times described the sale of Swinford Toll Bridge, which is expected to make £1 million or more at auction. It is one of the last toll bridges in Britain still in private hands. Cars are charged 5p each time they cross, and lorries up to 50p. The buyer will be exempt from paying any income tax, including the new 50% band, from the £190,000 in tolls collected each year. The bridge will also provide an inheritance-tax shelter and a buffer against stamp duty and capital gains tax. A toll-keeper’s cottage comes as part of the sale.
Growing government debt increases
During October, the government was forced to borrow an extra £11.4 billion to pay its bills as tax receipts fell by £4.1 billion compared to the same month last year. Total public sector net debt grew to £829.7 billion by 31st October, equivalent to 59.2% of total national output, the highest level since 1946. That compares with £695.1 billion and 48.6% a year earlier. Economists predict a total borrowing figure for the year of up to £220 billion. According to the BBC, politicians on both sides of the House were reported, off the record, as saying that the country can look forward to a high tax climate for many years to come.
Taxman targets rich ex-pats
HM Revenue & Customs has set up a new high-net-worth unit to monitor the movements and lifestyles of the UK’s 5,000 wealthiest individuals who claim to have moved to the Channel Islands, Monaco and other tax havens. Inquiries will range from the homes of their close family to their children’s schools and club memberships. Businessmen commuting to London from tax havens are expected to face particular scrutiny. Until this year, tax exiles could claim non-residency if they were in Britain for fewer than 90 days a year, under rules devised before private jets made it viable to commute. New HMRC guidelines make it clear that tax exiles must prove they have severed almost all links with the UK. HMRC changed its guidance rules after winning the case against Robert Gaines-Cooper, a businessman who faced a tax demand of £30m after inspectors challenged his non-residency status. He claims he left for the Seychelles in the 1970s. Gaines-Cooper spent fewer than 90 days a year in the UK on average, but tax inspectors argued that he was still resident here because he owned property and cars in the country and because his son went to Eton.
Deadline for offshore amnesty extended
The taxman has announced an extension to the deadline on its amnesty for individuals to come forward with tax liabilities arising from offshore bank accounts. The offshore new disclosure facility, or NDO, will now run until 4th January instead of closing on 30th November. Over 300 banks were contacted by HMRC to disclose details of overseas account holders. Those individuals now have until the New Year deadline to come forward to give notice that they have potential liabilities. Meeting the deadline means account holders can pay their unpaid tax with a lesser penalty. The final deadline for payment remains 12th March 2010.
Liechtenstein Disclosure Facility opens, to muted response
Those with offshore accounts opened at overseas branches can now register for the Liechtenstein Disclosure Facility. It has been suggested by a number of advisers that take-up will be low. Once the final disclosure window closes on 12th March 2010, taxpayers who have not come forward but are found to have unpaid tax liabilities will face penalties of at least 30%, rising to 100% of the tax evaded, and risk criminal prosecution, HMRC warned on its website.
Offshore centres face growing scrutiny
Malcolm Couch, assessor of income tax in the Isle of Man, recently warned there would be “increased attention on the development and implementation of tax standards over the next five years”.
“This year we have seen increased attention on how countries around the world implement tax standards and cooperate with each other, and this was particularly highlighted by the focus of the G20 and the OECD on the issue,” said Dr Couch.
“We have also seen the evolution of the Global Forum on Transparency and Exchange of Information into a formally established body mandated to review international tax standards, and are now likely to see a proliferation of additional organisations scrutinising standards.”
He added that the development of effective standards would hinge on further cooperation from offshore centres.
UBS whistleblower hopes to walk free
Brad Birkenfield, the ex-UBS banker whose testimony helped uncover thousands of undeclared offshore accounts set up by the Swiss banking giant UBS, has appealed his jail sentence of 40 months on the basis that US prosecutors made a false statement at his sentence hearing.
1.5m pensioners “overpaying tax”
Some 1.5 million pensioners have overpaid a total of £250m in tax since 2002/3, according to a report by the National Audit Office (NAO). The overpayment calculates to an average of £171 each. This was due to discrepancies between tax authority records and tax deducted by employers and pension providers. Older people may also be paying more tax because they do not claim additional age-related tax allowances. These allowances would boost their income by up to 4%. The NAO estimated that 3.2 million pensioners did not claim the additional allowances. Some might not claim them because they did not have sufficient income to pay tax, while others did not realise they were entitled to them. HMRC estimated that 2.4 million older people had also paid around £200m more in tax because they did not have their savings income paid gross.
Plans for cohabiting couples to receive better inheritance rights
The Law Commission for England and Wales wants unmarried partners to be able to inherit each other’s wealth, even if they haven’t written a will. The Commission points out that there are now more than two million cohabiting couples in the country, a figure that is soon expected to rise to three million and that some 30% of children are born into such relationships. The Commission’s proposals would allow any couple that have been together for five years, or who have children, to inherit from the other partner just as they would had they been married.
EU presses ahead with tax information sharing rules
Plans for an EU directive banning countries from refusing to supply taxation information on grounds of banking secrecy is to be put to the Economic and Financial Affairs Council in Brussels, where ministers will be asked to agree the general approach, including the extent to which it will apply to third countries, like Liechtenstein and Switzerland.
