STEP Bahamas UK tax update March 2013 Dawn Register
Setting the scene UK stage Need to increase the tax take to pay for the budget deficit / Eurozone debt crisis Emphasis on changing taxpayers behaviour Tax evasion as morally disgraceful Media hype Continued emphasis on tackling unacceptable tax avoidance New powers and penalties in practice Targeted use of resources identifying high risk areas Encouraging voluntary disclosure Spotlight on rogue tax agents New international tax agreements
Setting the scene world stage President Obama focus on tackling tax evasion. US court orders to convict citizens of tax evasion via offshore banks. USA legislation Foreign Account Tax Compliance Act (FATCA) OECD focus on High Net Worth Individuals G20 focus on international tax transparency Tax amnesties in USA and other European countries New Tax Information Exchange Agreements UK / Liechtenstein special tax deal 2009 UK / Switzerland Tax Agreement from 2013 Anti-capitalist campaigns focus on tax evasion
Spotlight on professional advisers
HMRC powers and safeguards laugh or cry? -
HMRC powers of enquiry & information Government information sources Statutory information powers to obtain information if in the power or possession of someone in the UK Information requests to third parties Tax return enquiries The real nasty stuff...
HMRC additional ammunition Managing Deliberate Defaulters Programme Publishing the names of deliberate tax defaulters naming & shaming Fines for dishonest tax agents Use of stolen data Increased penalties for offshore non-compliance Specialist units based on risk 7
Offshore penalties the categories Category Effect on the penalty % Examples of countries 1 Same as for UK situs issues maximum penalty is 100% of the tax underpaid 2 Multiply the penalty negotiated using the FA 2007 by 1.5 i.e. maximum penalty is 150% of the tax underpaid 3 Multiply the penalty negotiated using the FA 2007 by 2 i.e. maximum penalty is 200% of the tax underpaid Australia, New Zealand, Canada, Cayman Islands, Cyprus, France, Germany, Guernsey, Isle of Man, Italy, Japan, Malta, S Korea, USA Bahamas, China, India, Israel, Jersey, Libya, Liechtenstein, Indonesia, Mexico, Russia, South Africa, Switzerland, Turkey Andorra, Barbados, Belize, Brazil, Cuba, Iran, Iraq, Jamaica, Monaco, Mauritius, N Korea, Panama, Peru, Seychelles, United Arab Emirates
Dealing with HMRC safeguards Maintaining a low risk profile Enquiries - avoiding head in the sand approach Appeals Tax Tribunal Informal negotiation Alternative Dispute Resolution - mediation 9
HMRC - offshore trusts and structures Still useful for Non-UK domiciled individuals and prior to becoming deemed domicile for UK inheritance tax - Discretionary, Life/fixed interest, charitable etc. - Planning ideas Foundations - HMRC do not recognise status of Foundations Non-Domicile status - HMRC attitude - Tax tips for non-doms
Tax Disclosures it not all bad news
Its a small world
Liechtenstein Disclosure Facility The disclosure process - Open from 1 September 2009 to 31 March 2016 - Amnesty for all UK taxes prior to 6 April 1999-4 years time limit if innocent error - Covers all UK taxes, including Inheritance Tax - Fixed 10% penalty to 5 April 2009 - Option to elect for single composite rate of 40% - Registration Certificate at the start of process - Disclosure Certificate at end of process - Immunity from prosecution
A ground breaking deal with Liechtenstein
LDF examples of Trust cases UK tax treatment of foreign entities such as foundations, stiftungs and anstalts Review of trust deeds and regulations Sham trust agreements Excluded Property Trust Channel Island Trusts English law Will trusts Moved trusts into Liechtenstein through change of trustees LDF Registration of trustees and beneficiaries
LDF examples of Estate cases Composite Rate Option for 1999 2009 of 40% tax eliminate UK inheritance tax liabilities Single Charge Rate for 2010-11 of 50% tax Concern regarding incomplete IHT forms submitted to HMRC Future Composite Rate Options Claiming the amnesty for death estates pre 6 April 1999 LDF registration of Executors of the Estate Deceased taxpayers Interaction with time limits No penalty for deceased taxpayers
UK / SWITZERLAND AGREEMENT George Osborne: We will be as tough on the richest who evade tax as on those who cheat on benefits. The days when it was easy to stash the profits of tax evasion in Switzerland are over. One off levy applies to balance of Swiss account at 31/12/10 21-41% rate of one off levy to be paid in May 2013 Future withholding tax Future information exchange Choice for Swiss account holders LDF or one-off levy? Not an amnesty nor a disclosure facility
UK / SWITZERLAND AGREEMENT The withholding tax apply from January 2013 onwards at rates of 48% on interest, 40% on dividends and 27% on capital gains. Onus on Swiss paying agent to implement Anti-abuse provisions HMRC will be given a list in 2014 of top 10 countries where money leaves Switzerland Who will be on the top 10 list? Funds leaving Switzerland?
Swiss assets impact for compliant taxpayers Non UK Domiciled individuals:- Pay Remittance Basis Charge ( 30k) in 2010-11 or 2011-12 Can opt out of one-off levy if no UK tax problems in past Need certificate from a lawyer, tax adviser or accountant re Non-Dom status and UK tax compliant. Issue re uncertain domicile status, remittance review. From 1 January 2013 NEW Inheritance Tax Levy:- Assets frozen by Swiss institution Need to prove Non Domiciled for UK inheritance tax purposes If not 40% withholding based on relevant assets at date of death
Isle of Man Disclosure Facility from 6 April 2013 Based on the blueprint of the LDF Partial amnesty for taxes pre April 1999 Fixed penalties Need Isle of Man assets Can transfer funds to IOM prior to 31 December 2013 Financial commitment upfront No immunity from prosecution LDF may still be best option? Announced alongside automatic information exchange Awaiting further details on process
Top tips & benefits of voluntary disclosure A managed process Conclude all tax liabilities and move forward Private, civil settlement Limited investigative work by HMRC Immunity from prosecution Lower penalties No publishing of names in public domain Costs may be lower compared with a full investigation Clarify previous uncertainties such as residence, domicile, UK tax treatment of offshore structure.
Post disclosure planning Segregation of bank accounts agreement on clean capital funds Remittance of monies to the UK without further tax charges Inheritance tax planning Using UK tax reliefs and allowances Charitable giving New trust settlements e.g. excluded property trust
Latest Developments & what next?
Major changes in UK tax law in 2013 Investing in the UK by Non-UK domiciled individuals Ownership of UK residential property Statutory Residence Test from 6 April 2013 GAAR General Anti-Avoidance Rule
Huge flow of information to HMRC
HMRC - Offshore Co-ordination Unit (OCU) Handling and acting on information relating to offshore First project Stolen data from HSBC Switzerland 7,000 UK residents, may of who have undeclared tax liabilities. "The information HMRC holds is vast and we hold about 80 times more data than the British Library" Greg Skyte, Head of OCU. Scrutinise the affairs of up to 500 people a year, whose bank details HMRC can now request from the Swiss authorities under the UK/Swiss Agreement. Managing Isle of Man Disclosure Facility
HMRC - High Net Worth Individuals Tax affairs of high net worth individuals Previously individuals with wealth of 5m to 20m January 2013 extended to taxpayers with 1m+ assets or income over 150,000 New Affluent Unit Focus on property sales 300,000 people 17 teams in six locations across the UK Recruitment of 100 additional inspectors Target to raise 586m extra tax revenue by end of 2015
What next? Isle of Man agreement pressure on Jersey and Guernsey to follow with bespoke agreements Pressure on banks e.g. state funding Automatic information exchange becoming the new international standard UK hosting G8 meeting in June 2013 - tax on the agenda Continued focus on wealthy taxpayers and all things offshore Worldwide information flows from FATCA
Summary Political will and agenda Plus public mood and perception Resolving disputes consider all options Never underestimate the information flows to HMRC International information exchange Voluntary disclosure is best wherever possible Specialist new units within HMRC to tackle evasion and avoidance
ANY QUESTIONS? DAWN REGISTER t: +44 20 7893 2653 e: dawn.register@bdo.co.uk www.bdo.co.uk