The draft Finance Bill extends the charge to tax to the disposal of UK commercial property by non-UK residents. The draft legislation includes some significant changes from the consultation proposals, most notably concerning the rules for indirect disposals. When considering whether a company is property rich, an exception will apply where interests in UK land are used for the purposes of a trade, though further clarification is needed. The substantial indirect interest test to determine whether the new rules apply to a particular non-UK resident investor has been reduced to a two year period, and a narrower view is taken of when an investor’s interests are to be aggregated with those of connected persons. The proposed rules need to be considered in the context of any applicable double tax agreement between the UK and the country of residence of the non-resident person making indirect disposal of UK property. Despite the draft legislation taking effect from April 2019, a considerable number of complex principles and issues remain to be resolved, particularly in relation to collective investment schemes.

With ‘L-day’ (as HMRC calls it) fast approaching, we should soon see the draft provisions that will bring non-resident corporate landlords within the charge to corporation tax on both income and capital gains from 2020. Although the key policy decisions appear to have already been made, Non-resident companies chargeable to income tax and non-resident CGT: Summary of Responses (published on 1 December 2017) showed that HMRC still had a lot of thinking to do on how the transition to corporation tax would work. This article looks ahead to what the draft legislation needs to cover.

A consensus is emerging among the tax profession for the government to delay any plans to extend its recent reform of public sector off-payroll working rules to the private sector until April 2020 at the earliest.

Following the HM Treasury and HMRC consultation, which ended on 10 August, the CIOT agrees in its response that the level of non-compliance with the rules means that the government needs to take action. However, the CIOT argues that this does not necessarily mean that extending the public sector rules to the private sector is the best approach. The Institute suggests alternative measures, such as enhanced record keeping, filing regular reports of payments to personal service companies (PSCs), increased penalties for non-compliance and making the worker jointly liable for PSC debts of PAYE and NICs.

IRS Clampdown

The Fixing America’s Surface Transportation Act (FAST Act) requires the IRS to notify the State Department of people who owe more than $51,000 in back taxes, penalties, and interest. Failure to pay back the taxes can potentially result in the State Department to deny, refuse renewal or even in some more severe cases, revoke their passports. In an article by the Wall Street Journal, they reported that at least 362,000 US citizens are affected by this policy and the IRS are in the process of informing the State Department of these individuals.

In 2012, the IRS introduced the Offshore Voluntary Disclosure Initiative to assist taxpayers to reduce their tax penalties. The 2012 OVDI mirrored its predecessor 2011 OVDP which followed on from the original 2009 OVDP, however, the maximum “FBAR-related” penalty rose from 25% to 27.5%. Participants of the OVDI must file all original and amended tax returns as well as include payment for back taxes and interest for up to eight tax years, not to mention paying accuracy-related and/or delinquency penalties. However, due to a significant decrease in the number of participating taxpayers, the IRS has announced that the Offshore Voluntary Disclosure Initiative will close in September 2018.

Is all hope lost?

In a word, no. The US Streamlined Foreign Offshore Compliance Procedure was introduced in June 2014 to assist non-resident US taxpayers whose foreign account non-compliance was “non-wilful” and is far less onerous and expensive compared to the various OVDIs we have witnessed. This consists of amending or filing for the first time the last three years of US tax returns to report earnings from foreign assets, paying the necessary tax and interest as well as filing and/or amending previous six years of delinquent Foreign Bank Account Reports (FBARs). The operative term to note here is that this procedure will only be applicable to “non-wilful” individuals, an observation which is determined and judged by the IRS on a case by case basis

Additionally, there is a final opportunity to correct your affairs with HMRC, potentially with no penalties!

HMRC introduced the Requirement to Correct (RTC) statutory obligation for taxpayers with overseas assets to correct any issues with their historic UK position. Failure to comply with this regulation, individuals will face punitive financial penalties and potentially other severe sanctions. HMRC wants all taxpayers who have or who had any offshore financial connections (including those who consider themselves to be non-UK domiciled and/or non-UK resident) to review their UK tax affairs to ensure that all tax returns are correct. Furthermore, taxpayers should ensure they submitted tax returns for all years for which they owed tax on income or gains. Originally, Taxpayers had to disclose to HMRC of their intention and provide information about their UK tax affairs before the deadline of 30 September 2018. HMRC have recently updated their guidance and are allowing Taxpayers to notify HMRC of their intention to disclose via HMRC’s Worldwide Disclosure Facility by 30 September 2018. If the process is completed, within 90 days of HMRC’s acknowledgment, further penalties can be avoided. Previously, all corrections were required to have been made by 30 September 2018.

Please find a link to a useful tool which provides general guidance on the Statutory residence test.

Click here for the Statutory Residence Test Flowchart PDF

Please do not rely on this solely to determine your status as there are over 100 pages of guidance from HMRC and various rules and definitions which need to be taken into account before one can definitively determine one’s status.

Please contact Frontier to discuss this matter further if you require detailed advice.

The Chancellor’s 2018 Spring Statement gave the government the opportunity to consider the longer-term fiscal challenges ahead of Brexit, and initiate consultations on how these can be addressed.

Following this, we have put together a PDF which provides an overview of the updated forecasts for the UK economy and public finances, which we trust you will find useful.

Please follow the link to view/download the Spring Statement 2018 as PDF:
View Spring Statement 2018

Please visit the link below to view Tax Rates 2018-19:

This Report, which was written immediately after the Chancellor of the Exchequer delivered his Budget Speech, is intended to provide an overview of the latest announcements and recent measures most likely to affect you or your business.

Throughout this guide, we have included tips and ideas to assist you with effective tax and financial planning. We can help to ensure that your nancial plans remain effective, even as your personal and business circumstances change. We will work alongside you to help you achieve a rewarding and financially secure future.

Click here to view and download Frontier Group Budget Report 2017