The following are some of the items that might interest the international planner.
Annual Tax on Enveloped Dwellings (ATED)
Finance Act 2013 introduced the ATED on certain non-natural persons (e.g. trusts and companies) owning UK residential property where that property is valued at more than £2m.
With this threshold being reduced to £500,000 with effect from 1 April 2016, many more properties will be brought into the charge.
The thresholds and charges for 2014-15 are:
|Property value||Charge for 2014-15|
|Less than £2m||Nil|
|£2m – £5m||£15,400|
|£5m – £10m||£35,900|
|£10m – £20m||£71,850|
|More than £20m||£143,750|
Offshore employment intermediaries
Anti-avoidance legislation will be introduced in Finance Bill 2014, to strengthen obligations to ensure that the correct income tax and National Insurance contributions are paid by offshore employment intermediaries. These changes will have effect from 6 April 2014.
From 6 April 2015, the maximum amount of an eligible individual’s savings income that can qualify for the starting rate of tax for savings will be increased to £5,000, and this starting rate will be reduced from 10% to 0%.
If an individual’s taxable non-savings income in a year exceeds the starting rate limit for savings, that limit will not apply. However, should taxable non-savings income in a year be less than the starting rate limit, the savings income will be taxable at the starting rate (0%), up to the “starting rate limit”.
This could offer a planning point for holders of offshore bonds.
Take Noah, aged 45, for example. He is taking a career break, and has no income. In 2015-16, he realises a chargeable event gain of £20,000 on an offshore bond.
His taxable non savings income is nil. However, because gains on offshore bonds are savings income, the new “starting rate for savings” (0%) applies to the first £5,000.
So £10,500 is “covered” by personal allowance, the next £5,000 taxed at 0%, and the remaining £4,500 taxed at 20%.
So, Noah’s bond gain is taxed as follows:
|Portion of Gain||Tax allowance/rate||Tax|
|£10,500||personal allowance at 0%||0|
|£5,000||starting rate for savings at 0%||0|
So, on a gain of £20,000, Noah has only paid tax of £900.
Capital Gains Tax
HMRC is consulting on levying a capital gains tax (CGT) charge on the disposal of UK houses owned by non-residents (whether individuals, trusts, companies or other entities).
Since its inception in 1965, the territorial scope of CGT has been limited by the owner’s residence status;
(a) UK resident individuals are liable to CGT in respect of disposals wherever the asset was situated.
(b) Non residents are only liable to CGT in respect of assets used in UK businesses.
In the 1980s, offshore trusts were widely used to avoid CGT – a course of action which led to the famous Furness v Dawson case – and pages of anti-avoidance legislation. Has the CGT wheel turned full circle?
The changes to UK pensions will be far reaching. What do they mean for QROPS and “pension liberators”? The proposals surrounding access to pension funds will provide a host of planning opportunities for advisers.
At the moment, a wide class of individuals can claim personal allowance against taxable UK income. The government will consult on a restrict of personal allowance to UK residents and those living overseas who have “strong economic connections in the UK”. The objective is presumably to bring the UK in line with the general practice in other EU member states.
Where a UK resident non-dom has UK and overseas earnings from the same employment, planning opportunities existed to reduce the effective rate by use of dual contracts. Strategies of this nature will be combatted by treating such foreign employment income as taxable on the arising basis, rather than the remittance basis, unless the non UK tax is levied at a rate of at least 29.25%.