Sovereign’s UK office is preparing for a busy start to next year and, it seems, we’re not the only ones. Many law firms have been telling staff to limit holidays in the run-up to the sweeping changes to the tax rules for non-doms next April.
Imagine a UK prime minister telling voters that it was “smart” to not pay income tax. When US presidential candidate Hillary Clinton attacked rival Donald Trump in the first presidential debate for not releasing his federal income tax returns, she said the only Trump returns that anybody had ever seen “showed he didn’t pay any federal income tax”. Trump quickly retorted: “That makes me smart.” Only in America!
From Trump to chump. England football captain Wayne Rooney is having a miserable time on the pitch at the moment and it’s not much better off it. HMRC has embarked on a crackdown on film partnership investments and other tax avoidance schemes and I can see a lot of litigation on the horizon.
Still it’s good to know that Trump will put the UK first in line for a trade deal with the US if he wins the election and that Australia is already working on a post-Brexit trade deal. In uncertain times like this, it’s good to know that friends are there for you.
Good news too from the Wine and Spirits Trade Association. It claims that cutting tax on alcohol is not only good for the consumer, but a prudent financial move for the government. I’m not going to argue with that.
Trump “a genius” if he paid no taxes
Allies of US presidential candidate Donald Trump said he was a “genius” if a report was true that he paid no federal income taxes for 18 years, said the BBC. It followed a claim by the New York Times that it had received some of Trump’s 1995 tax documents revealing $915 million losses that allowed him to legally avoid paying taxes. The real estate tycoon’s camp refused to confirm or deny the report, but said the filing was “illegally obtained”. The campaign of his rival, Hillary Clinton, called it a “bombshell”. But Trump’s supporters took to the airwaves to defend him. New Jersey Governor Chris Christie said the New York Times article was a “very good story” because it showcased the “genius” of Trump. Former New York mayor Rudy Giuliani, a close adviser to Trump, also said the Republican nominee was an “absolute genius” if he avoided federal income taxes.
One in three of Britain’s richest people under tax investigation
One in three of the richest people in Britain are under investigation by HM Revenue & Customs over nearly £2 billion of potentially underpaid tax, writes Vanessa Houlder in the Financial Times. The National Audit Office found that a specialist HMRC unit set up to scrutinise the tax affairs of the super-rich had secured an extra £416 million of tax in 2015/16, up from £200 million in 2011/12. The unit examines the tax affairs of 6,500 of the wealthiest people in the UK, with assets of more than £20 million. The extra tax raised from this group, who account for just 0.02% of all taxpayers, came on top of the £3.5 billion they paid in the form of income tax and national insurance — which was 1.3% of the total revenue for those taxes — and £880 million in capital gains tax, which was 15% of the total. More than half of the disputed tax concerned tax avoidance schemes that were used by about 15% of the individuals monitored by the unit.
Record tax windfall from wine
The UK’s wine industry generated a record £4 billion in tax revenue in the past 12 months while spirits revenues increased by £54m in the past six, despite a freeze on wine and cut on spirits duty in 2015, writes Lauren Eads in The Drinks Business. According to the Wine and Spirits Trade Association (WSTA), wine duty income increased on the previous year by £139 million (+3.6%) from April 2015 to March 2016 inclusive, following a freeze on wine duty in 2015. Following the 2% cut in spirits duty in the 2015 budget, spirits duty income increased on the previous year by £125 million (+4.1%) from April 2015 to March 2016 inclusive. The WSTA claimed the figures prove that cutting tax on alcohol is not only good for the consumer, but a prudent financial move for the government. The UK currently pays among the highest duties on alcohol in Europe, with 55% of the average bottle of wine in shops and supermarkets made up of tax, rising to 74% for a bottle of spirit.
Lawyers prepare for deluge of UK non-dom tax work
Lawyers and trust experts have been told to limit holidays in the run-up to sweeping changes to the tax rules for wealthy foreigners next year, write Jane Croft and Vanessa Houlder in the Financial Times. In April next year, thousands of long-stay “non-doms” – people whose permanent home is outside the UK – are due to lose some of their tax advantages. The far-reaching changes have created huge amounts of work that will have to be compressed into just a few months. Former chancellor George Osborne announced the changes last year to tackle “fundamental unfairness” in the tax regime but clients cannot act until the fine print of the legislation is published at the end of this year. Many people who are due to lose their “permanent” non-dom status because they have lived in the UK for at least 15 years are being advised to create offshore trusts before next April. These will remain outside the UK tax net provided that no money is paid in or out. Others are extracting funds from their trusts, restructuring their property holdings or considering whether to leave the UK.
Rooney faces £3.5 million bill for “tax avoidance”
On top of a lack of goals and being dropped to the bench for club and country, England football captain Wayne Rooney is facing a £3.5 million charge after tax authorities challenged a suspected avoidance scheme in which he was the largest investor, writes Alexi Mostrous in The Times. The footballer used Invicta 43 to shelter £12.5 million, which he borrowed, to avoid tax legally on his then £4 million annual salary at Manchester United for three years. A total of 225 wealthy investors collectively bought the rights to two Hollywood films under the Invicta deal. An HMRC spokesman said partner payment notices (PPNs) had been sent out “where we consider the arrangements used to be avoidance”. Rooney is understood to be one of a minority of investors who has not yet received a formal tax demand. It is the fifth occasion in four years that the tax authorities have challenged investments made by Rooney.
Australia working on Brexit trade deal with UK
Senior Australian trade officials have already begun working on a trade deal with the UK, High Commissioner Alexander Downer told The Sunday Telegraph. A deal could make goods such as wine, beef and dairy products cheaper for UK consumers, while Australia is a major importer of cars. Services such as finance would also be covered in a deal. Downer insisted Australia would want few barriers: “Our starting point is always that free trade means free trade, to borrow a phrase.” The UK’s exports to Australia amounted to £4 billion last year, while imports from Australia were worth almost £2 billion. Meanwhile, Donald Trump’s trade adviser Dan DiMicco said the UK would be first in line for a trade deal with the US if Trump wins the election. DiMicco said Britain was “a friend” of the USA and was leaving the EU for the right reasons, adding that with the present Trans-Atlantic Trade and Investment Partnership (TTIP) proposals “on hold”, Britain would be at the front of the queue for any future trade deal once it has left the EU.
If you require any further details, please contact Simon Denton.