October 22, 2019
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The Internal Revenue Service has recently announced new procedures that will enable certain individuals who relinquished their U.S. citizenship to come into compliance with their U.S. tax and filing obligations and receive relief for back taxes.

The new Relief Procedure only applies to individuals who have not filed US tax returns as US citizens or residents, owe a limited amount of delinquent US taxes and have net assets of less than $2 million. Relief can only be obtained by individuals who were non-wilful with their past compliance failures. This is common for taxpayers who have lived outside the US for the majority of their lives and were unaware of their US tax filing obligations.

Individuals that qualify on this basis must file outstanding US tax returns for the five years preceding and their year of expatriation. If the taxpayer’s liability does not exceed a total of $25,000 for the six years, the taxpayer does not have to pay any US taxes. The aim of these procedures is to provide certain former citizens with tax relief. Penalties and interest are not assessed on individuals who qualify for this relief.

The IRS are yet to set a specific termination date and will announce this prior to ending the procedures. Individuals who relinquished their U.S. citizenship any time after March 18, 2010, are eligible so long as they satisfy the other criteria of the procedures.

Estates, trusts, corporations, partnerships and other entities are not entitled to use these procedures as it is only available to individuals.

Relinquishing U.S. citizenship and the tax consequences that follow are serious matters that involve irreversible decisions. Taxpayers who relinquish citizenship without complying with their U.S. tax obligations are subject to the significant tax consequences of the U.S. expatriation tax regime.

Please feel free to contact us should you have any queries regarding the above and we would be delighted to assist you.


October 22, 2019
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The IR35 ‘off-payroll’ rules will be extended to the private sector from April 2020 onwards, directly affecting many contractors and self-employed individuals who carry out consulting work under the umbrella of a one-person limited company.

You may be affected by these rules if you are:

  1. a worker who provides their services through their intermediary
  2. a client who receives services from a worker through their intermediary
  3. an agency providing workers’ services through their intermediary

If the rules apply, tax and National Insurance contributions must be deducted from fees and paid to HMRC directly.

From 6 April 2020:

  1. All public sector authorities and medium and large-sized private sector clients will be responsible for deciding if the rules apply.
  2. If a worker provides services to a small client in the private sector, the worker’s intermediary will remain responsible for deciding the worker’s employment status and if the rules apply.

If you require assistance with either of these issues or any other matter, please contact your normal adviser at Frontier.


October 22, 2019
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HM Revenue & Customs have collected around £325m and £185M in annual allowance and lifetime charges respectively for the 2017-18 tax year according to Hargreaves Lansdown. Ordinarily, the pension contribution allowance is £40,000 each year tax-free, however, this is reduced to ultimately to £10,000 for those with incomes of £110,000 or more. The lifetime allowance currently is £1.055M

Greater awareness needs to be placed on the contribution that you and your employer both make because pension charges kick in as soon as you are over the threshold and it would be too late to rectify once the tax year has ended. Therefore, we urge you to plan your pension contribution from a tax perspective for the years going forward and ensure you are aware of the relevant contributions ideally at the beginning of the year. Although carrying out a review now would be sensible.

As mentioned, there has also been a spike in the number of people breaching their lifetime allowance. Therefore, individuals with pensions funds which are likely to exceed the lifetime allowance by the time they retire should consider a review of their pension arrangements and contributions.

It may be advisable therefore to review both your pension contributions and value of your pensions to ensure you do not suffer any unexpected pension charges.


September 6, 2019
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Tax practitioners and taxpayers alike have long struggled to determine whether virtual currency, aka cryptocurrency, is reportable for purposes of FinCEN Form 114, Report of Foreign Bank and Financial Accounts (FBAR).

Virtual currencies have several simultaneous properties that make them challenging for practitioners and regulatory bodies to classify.

The AICPA Virtual Currency Task Force reached out to Treasury’s Financial Crimes Enforcement Network (FinCEN) to help practitioners answer this question. FinCEN responded that regulations (31 C.F.R. §1010.350(c)) do not define virtual currency held in an offshore account as a type of reportable account. Therefore, virtual currency is not reportable on the FBAR, at least for now. This may change in the future, especially considering the influx of stable coins.


September 6, 2019
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One aspect of the new regime that has been the subject of much debate is that, from 6 April, a tax charge will arise on gains on disposals by non-residents of interests in entities that themselves hold UK real estate. This so-called “indirect disposal” charge will only apply to disposals of interests in “property rich” entities. This will be the case if:

  • at the time of disposal, at least 75% of the value of the interest (e.g. shares) sold is derived from UK land. This test is applied to the gross-asset value of the entity in question, using the market value of the assets at the time of disposal; and
  • the non-resident making the disposal holds at least a 25% interest in the entity.

There will be a “trading” exemption so that (broadly) a disposal of an otherwise “property rich” entity by a non-resident will not be caught by the new tax charge if the UK land held by the entity is used in the course of a trade during the 12 months prior to the disposal, and immediately
after. This is likely to benefit hotels, care homes and retailers.


September 6, 2019
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The Finance Act 2019 has greatly extended the territorial limits of UK tax where capital gains are concerned. Non-resident persons are now taxable not only on UK residential property gains, but also on UK commercial property gains. However, the most radical aspect of the FA 2019 is the introduction of new rules allowing non-resident persons to be taxed on gains realised on the disposal of assets that are not themselves UK land, but derive some or
all their value from UK land.

Non-residents have for some time had an advantage over UK residents when it comes to the taxation of UK commercial real estate, because unlike most other major jurisdictions the UK does not exercise its full taxing rights
as afforded by international tax rules.

The government now attempts to ‘level the playing field’.

From 6 April 2019, a single UK tax regime will apply to sales of both residential and commercial UK real estate by non-residents, comprising

  1. a new UK tax charge for gains on “direct” sales of UK real estate; and
  2. a new UK tax charge for gains on “indirect disposals” of UK “property rich” interests. This will bring within the scope of UK tax disposals by non-residents of certain companies, partnerships and unit trusts holding UK real estate.

The applicable rate of UK tax will be 19% (Falling to 17% from April 2020) for non-resident companies caught by the new rules and, for non-resident individuals and others, up to 20% (in the case of commercial property) and up to 28% (in the case of residential property).

The new tax charge(s) will in each case only apply to gains arising since 6 April 2019 (i.e. property held at that date will be rebased to its current market value).


September 6, 2019
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HMRC want to better focus the Private Residence Relief (PRR) by ensuring that those gains or losses that arise when a person sells or otherwise disposes of a dwelling that has been used as that person’s only or main residence is kept outside of the realm of Capital Gains Tax. Since its
inception in 1965 it provided a protection that homeowners who legitimately occupied their properties will not be hit with a tax bill in the event they sell and move on to another property for whatever reason.

The proposed changes are as follows:

  • Reducing the final period exemption from 18 months to 9 months;
  • Restricting lettings relief to periods where the property owner is also in occupation;
  • Adjusting the rules for giving PPR where the property has been transferred between spouses;
  • Legislating for extra statutory concessions: D 21 (late claim for main residence) and D49 (delay in moving into a property); and
  • Extending the PPR relief for job-related accommodation to military service personnel, where the accommodation is not owned by the MOD.

Lettings relief will no longer apply for periods where the whole house is let, which will hit “move and let” landlords.

These changes are all expected to come into effect for disposals made on and after 6 April 2020.


September 6, 2019

UK bannerIn this summer edition of the Frontier Newsletter our focus is on UK property tax changes which have either happened or are in the process of coming into action in the foreseeable future. If you are intending on disposing property assets whether you are UK Resident or Non-UK Resident, the below articles are worth a read before contacting us to ensure they are planned out in the most tax efficient manner.

CGT: Changes proposed for PRR

HMRC want to better focus the Private Residence Relief (PRR) by ensuring that those gains or losses that arise when a person sells or otherwise disposes of a dwelling that has been used as that person’s only or main residence is kept outside of the realm of Capital Gains Tax. Since its
inception in 1965 it provided a protection that homeowners who legitimately occupied their properties will not be hit with a tax bill in the event they sell and move on to another property for whatever reason.

The proposed changes are as follows:

  • Reducing the final period exemption from 18 months to 9 months;
  • Restricting lettings relief to periods where the property owner is also in occupation;
  • Adjusting the rules for giving PPR where the property has been transferred between spouses;
  • Legislating for extra statutory concessions: D 21 (late claim for main residence) and D49 (delay in moving into a property); and
  • Extending the PPR relief for job-related accommodation to military service personnel, where the accommodation is not owned by the MOD.

Lettings relief will no longer apply for periods where the whole house is let, which will hit “move and let” landlords.

These changes are all expected to come into effect for disposals made on and after 6 April 2020.

Non-residents and UK real estate: the April 2019 changes

The Finance Act 2019 has greatly extended the territorial limits of UK tax where capital gains are concerned. Non-resident persons are now taxable not only on UK residential property gains, but also on UK commercial property gains. However, the most radical aspect of the FA 2019 is the introduction of new rules allowing non-resident persons to be taxed on gains realised on the disposal of assets that are not themselves UK land, but derive some or
all their value from UK land.

Non-residents have for some time had an advantage over UK residents when it comes to the taxation of UK commercial real estate, because unlike most other major jurisdictions the UK does not exercise its full taxing rights
as afforded by international tax rules.

The government now attempts to ‘level the playing field’.

From 6 April 2019, a single UK tax regime will apply to sales of both residential and commercial UK real estate by non-residents, comprising

  1. a new UK tax charge for gains on “direct” sales of UK real estate; and
  2. a new UK tax charge for gains on “indirect disposals” of UK “property rich” interests. This will bring within the scope of UK tax disposals by non-residents of certain companies, partnerships and unit trusts holding UK real estate.

The applicable rate of UK tax will be 19%[1]
for non-resident companies caught by the new rules and, for non-resident individuals and others, up to 20% (in the case of commercial property) and up to 28% (in the case of residential property).

The new tax charge(s) will in each case only apply to gains arising since 6 April 2019 (i.e. property held at that date will be rebased to its current market value).

“Indirect disposals”

One aspect of the new regime that has been the subject of much debate is that, from 6 April, a tax charge will arise on gains on disposals by non-residents of interests in entities that themselves hold UK real estate. This so-called “indirect disposal” charge will only apply to disposals of interests in “property rich” entities. This will be the case if:

  • at the time of disposal, at least 75% of the value of the interest (e.g. shares) sold is derived from UK land. This test is applied to the gross-asset value of the entity in question, using the market value of the assets at the time of disposal; and
  • the non-resident making the disposal holds at least a 25% interest in the entity.

There will be a “trading” exemption so that (broadly) a disposal of an otherwise “property rich” entity by a non-resident will not be caught by the new tax charge if the UK land held by the entity is used in the course of a trade during the 12 months prior to the disposal, and immediately
after. This is likely to benefit hotels, care homes and retailers.

[1]
Falling to 17% from April 2020.

US bannerIn this summer edition of the Frontier Newsletter our focus is on various US tax matters that you should take into consideration. Please read the articles below, these are a few topics that have been brought to light in the last few months.


Virtual currency not FBAR reportable

Tax practitioners and taxpayers alike have long struggled to determine whether virtual currency, aka cryptocurrency, is reportable for purposes of FinCEN Form 114, Report of Foreign Bank and Financial Accounts (FBAR).

Virtual currencies have several simultaneous properties that make them challenging for practitioners and regulatory bodies to classify.

The AICPA Virtual Currency Task Force reached out to Treasury’s Financial Crimes Enforcement Network (FinCEN) to help practitioners answer this question. FinCEN responded that regulations (31 C.F.R. §1010.350(c)) do not define virtual currency held in an offshore account as a type of reportable account. Therefore, virtual currency is not reportable on the FBAR, at least for now. This may change in the future, especially considering the influx of stable coins.


US/UK Charitable Donations

US & UK taxpayers must be careful when planning to make any charitable donations to ensure that it is tax efficient.

A UK resident taxpayer should typically donate to a UK charity instead of a US charity due to the higher tax relief which can be claimed on the donation. Taxpayers who have both a US and UK tax liability should consider donating to a dual qualified US/UK charity to obtain the maximum relief.

If the charity of your choice does not have a dual qualified entity, then you should consider donating to a dual qualified Donor-Advised Fund.
Donations to these entities are recognised for tax purposes in both jurisdictions.

Interest rates decrease for the third quarter of 2019

The Internal Revenue Service announced that interest rates will decrease for the calendar quarter beginning 1st July 2019. The rates will be:

  • 5% percent for overpayments [4% percent in the case of a corporation];
  • 5% percent for underpayments; and

Under the Internal Revenue Code, the rate of interest is determined on a quarterly basis. For taxpayers other than corporations, the overpayment and underpayment rate is the federal short-term rate plus 3 percentage points.


April 10, 2019
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The Internal Revenue Service is having trouble dealing with the information it’s getting from foreign banks about U.S. taxpayer assets under the Foreign Account Tax Compliance Act because of problems with the data, various mismatches and missing or inaccurate Taxpayer Identification Numbers provided by the foreign banks. Furthermore, the IRS lacks access to consistent and complete data on foreign financial assets and other data reported in tax filings by U.S. individual taxpayers, partly because some IRS databases don’t store foreign asset data reported from paper filings. Another major problem for FATCA has been the hardships faced by U.S.-born expatriates. Some Americans living abroad can’t get services from foreign banks that find the law too burdensome.

The GAO made seven recommendations to the IRS and other agencies to enhance the IRS’s ability to leverage FATCA data to enforce compliance, address unnecessary reporting, and better collaborate to mitigate burdens on U.S. persons living abroad


April 10, 2019
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Previously, in order to qualify for Entrepreneurs’ Relief, an individual must have held shares which represented five percent of the ordinary share capital which entitled them to five percent of the voting rights.

From 29 October 2018, the shares must also entitle the holder to five percent of the company’s distributable profits and five percent of the assets available to equity holders on a winding up.

The 2 key changes are:

• An extension of the qualifying holding period from one year to two years (introduced for disposals on or after 6 April 2019); and

• The claimant must have a five percent interest in both the distributable profits and the net assets of the company.

The extension of the qualifying holding period from one year to two years will mean that you need to consider your position at least two years in advance of any potential transaction to ensure the position is protected.