Understanding the Tax Changes for Non Domiciled Individuals

I have always been intrigued by this area of taxation and I often get asked by my clients to explain the latest rules so I thought it would be beneficial to write a blog post on it!

UK tax residents are taxed on their worldwide income and gains on an arising basis, this means whether the funds come into the UK or not they will be taxed. If those individuals are non UK domicile they can choose to benefit from a form of taxation known as the remittance basis, this means they will only be taxed on their UK source income and gains plus anything remitted to the UK.

It was announced back in 2008 that if you are non domiciled but have been resident in the UK for the past 7 out of 9 previous tax years if you choose to be taxed on the remittance basis of taxation you will be subject to a £30,000 tax charge. However from 6th April 2012, this charge will be increased for those individuals who have been in the UK for 12 out of the previous 14 years to £50,000 per year.

The UK government are concerned that this tax charge is discouraging investors from bringing money into the UK and investing in UK companies and thus new rules have been drafted and will be announced in the finance bill 2012, known as 'investment relief'.

It is being proposed that if you are non domicile and you bring funds from offshore to the UK and invests these funds in a qualifying UK trading company then there will be no tax charge on the remittance. I believe this will generate a lot of investment into UK companies and there can be a lot of planning work done for anyone you know who is non domiciled.

The investment can be a subscription for new shares or a loan in an unlisted company. The company must be one which is trading or is letting commercial property. As always the lettings of residential properties will not qualify nor does furnished holiday let. If for whatever reason the company becomes an investment company then the investor has 45 days to withdraw the cash either to invest in a new qualifying company or export the funds back to the UK.

One key point to note is that there is no limit on the amount of the investment possible in any one period or lifetime. There may even be entrepreneur’s relief on the sale of the investment in the UK so this really is worth considering.

If you know anyone that is non domiciled please forward this onto them and tell them to get in touch with us at LJD as I believe with proper planning it could save thousands of pounds of tax and this is the year to take advantage of it.

Thank you for reading my blog and feel free to contact me at mitch@ljd.uk.com


Mitch the Tax Man

Planting the Seed !

Before I begin on my chosen topic this week, as a spurs fan I thought I would just give my two cents worth on the Harry Redknapp vs HMRC case. For me the decision to prosecute Harry was all for publicity, it should never have gone to court and I really hope HMRC are happy paying 8 million pounds for this type of publicity.

Moving on, I attended a cracking course last week where I found out a bit more about the new Seed Enterprise Investment scheme (SEIS). It works along the same basis as EIS scheme where you invest in a qualifying company and you get tax relief on your investment; however this new scheme seems to be offering very generous reliefs

It was introduced in the Autumn Budget statement and comes in from 6th April 2012. The new scheme is designed to encourage investment in small, early stage companies.  The investor gets 50% tax relief, up to a maximum of £100,000 invested and the company is allowed to raise up to £150,000 from offering the relief.

I think this is astonishing, what is more astonishing is the fact that even if you are a basic rate tax payer you can still benefit from 50% relief.

Furthermore there is an exemption from capital gains tax on gains realised from the disposal of assets where the gains are reinvested through the new SEIS. This means that the total tax relief could reach an amazing 78% if taxable gains are reinvested into the SEIS. 50% tax relief and 28% cgt relief.

To claim the SEIS relief the investor must have received a compliance certificate from the issuing company. The company must not have more than 25 employees and not more than £200,000 gross assets and be not more than 2 years old.

Detailed final legislation on this will be included in the finance bill 2012.

In conclusion I believe this is a truly great incentive for investors to invest in UK companies and will generate a lot of interest. I am keen to see how many of my clients invest in new companies next year; however before you invest make sure you do your research about the company you are investing in!

If you have any queries or need any help with your tax please contact me mitch@ljd.uk.com

Thank you for reading my blog

Mitch the Tax Man

I survived the January Tax Returns !

Good morning everyone, Mitch Young from Lerman Jacobs Davis the young dynamic accountants who are committed to saving our clients hassle and money.

Some of you may be aware that the tax deadline for filing a tax return was extended till yesterday evening because of strikes from staff at HMRC. So why was I out for dinner last night looking so relaxed? Because at LJD we completed all our clients tax returns on time and submitted them with HMRC by the original deadline.

Having worked on over 900 tax returns this year I thought I would share a couple of tips to bear in mind for next year’s returns

1.     If you are a higher rate tax payer remember to keep a note every time you make a charitable donation. Too may clients just estimate these or do not have any evidence to back up the postings. What’s more is that the tax relief from making a charitable donation in the current year can be claimed back against the previous tax year so it is a good tax planning exercise.

2.     If you have any PAYE income make sure you have your tax code checked by a professional too often clients that have this income end up with a tax liability because they are on the wrong tax code. A prime example is where an employer puts you on a 747L code giving you an entitlement to a personal allowance where actually your income level well exceeds £100,000 so this should be tapered away.

This week I would love to speak with anyone you know who works in finance with a large organisation and would like to make sure they are not paying too much tax. Please pass them my details. mitch@ljd.uk.com

I am looking forward to my first weekend off in a month so please look back next week where I will be producing some more tax tips for you to enjoy.

Thanks for taking the time to read my blog

Mitch the Tax Man