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Income Tax Questions
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Tax assessment after emigration
Question: I will be permanently leaving the UK mid-way through a financial year. I understand that after the expiry of that financial year I will not be taxed on my non-UK sourced income. My question is how am I assessed for the remainder of the first financial year? Will I be assessed for UK tax on my non-UK income: (a) only that which is earned prior to my emigration; (b) all which is earned during the financial year of my emigration; or (c) a pro-rated (based on proportion of that year spent in UK) proportion of the income for that financial year? . . .
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08/09 Return -Foreign Income / Loss on ETFs
Question: I have both gains and losses on investments in an offshore ETF without UK distribution status. These gains and losses were through onshore brokers and the settlements were to onshore accounts. Where precisely on the tax return should these be disclosed ? Does the answer change depending on whether I am filing on remittance or worldwide arising basis ? . . .
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Trading foreign exchange - using an LLP?
Question: Interested in anyone with relevant experience or advice - obviously to do it properly i will have to pay for detailed advice, but any comments would be welcomed. I have been a member of an LLP trading foreign exchange for several years (relatively successfully). This will eventually end and i wish to continue trading foreign exchange on my own. Given that returns are (hopefully) going to put me in top tax bracket, AND i am relocating to Scandinavia with family(the EU bit !) in 2 years, probably for long enough to become non resident, was looking at company vehicle until and perhaps beyond 2 years. There may be other partners (very few) but not decided on LLP/Ltd company yet on commercial grounds alone. The business has few physical assets but a large amount of working capital used as collateral - this must be loaned to the company initially. The drawing requirement is quite discrete - i am happy to leave most returns in company to draw off over long term - return of initial capital can easily fund me for several years. The Scandinavian country am relocating to is in EU and has options to draw fraction of capital from company at discrete taxation levels, but anything in excess deemed as income will be heavily taxed. Am primarily looking to slow down income drawings over a period to keep me out of relevant higher tax brackets - am happy to pay reasonable amount of tax but am reluctant to be hit heavily over what might be a short term earnings window. Does anyone have relevant experience with this sort of setup or circumstances. . . .
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Return to UK - Minimizing tax on lump sums
Question: Expat for 20 years - back on same Company UK payroll as of 1st April 2010, but living in Holland until mid-July and then back to UK and resident thereafter. Will be made redundant 30th Dec 2010 and then early retirement. Large lump sum redundancy payment due January 2011. Pension has been paid into Company overseas pension fund. Propose to take immediate pension following redundancy and commute pension thereby taking a second large lump sum January 2011. Tax implications seem very significant. Can you recommend ways to ease the pain! Many thanks. . . .
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UK tax and offshore discretionary trust
Question: Dear Sirs, what are the tax implication of foreign domiciled individuals of an offshore discretionary Trust if they choose the remittance basis or the arising basis in case a distribution (of income or gains) is made or not? Kind regards . . .
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Director Working from Home
Question: If a director of a company decides to use a room at home in the start up phase of trading, can he claim for costs associated with making it an office? For the ongoing costs (rates, utilities etc), what can he reasonably claim for? . . .
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Normal expenditure out of income and debt waiver?
Question: If Dad waives son's loan instalments (with a deed): As I understand it (after much reading this evening), a transfer of value is from income if it can be shown not to be from capital (the other "gifts from income" requirements being met). That sounds good and my question is this: how can waiver of loan instalments not be depleting the estate capital value, by virtue of the debt not being repaid? I can find only one example where loan written off is treated as income, though I think it is a rather useful example, could it be used as argument? Here: http://www.hmrc.gov.uk/manuals/cfmmanual/CFM5207a.htm the key sentence being: Girtwest, the debtor, must bring in the £50,000 released as a profit into its accounts. This is required by FA96/S85 (3)(e) (NOT IHT but still a concept). My underlying concern here is that an IHT adviser has Dad using up mum and dad's £3,000 x 3 gift exemptions and I come along and say, "hang on, what about "gift out of income"?" I fear a tart response that a loan waiver depletes the estate and what do I know anyway? However Girtwest above does at least support the concept of waived loan being income. And then: "gift out of income" if defined as "not requiring use of capital" works - except that I cannot avoid the feeling it DOES deplete the estate's capital value. And so I go round in a circle. Rescue please? . . .
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Class A and Class B shares: profit distribution
Question: Dear Sirs Thanks for your advice, I have now opened a new limited company, a total of 4 shareholder and 240 shares worth £1 each as follows: I have 60 shares of class A (these are voting shares, with rights to profits) The other three shareholders have 60 shares each of class B (non-voting shares, dividends will only be issued upon vote and agreement of the directors). I am the only director doing the work, and I will be the only one extracting dividends. My question is this: Suppose I make £150k profit one of the years. I extract £50k as dividends for myself, and the rest I want to leave to extract as profit in the coming years. Is this possible, or will the 100k be distributed evenly between the four shareholders? I don't really understand how the £100k profit (that is not extracted will be treated as), and what options there are in terms of extracting it in the future. My other question is what does the company owe to the three class B shareholders who are not directors and not doing any work? I know each has originally put in £60 through shares and the company owes that back to them, but if the company makes a lot of profit, which is retained and not extracted through dividends, does the original £1 share value increase accordingly and how? or can I who is the only director and only one with class A shares decide to give back only a yearly 10% increase on the original £60 share value, and keep the rest of the profit. Many thanks in advance . . .
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Discretionary trust v flexible gift trust
Question: A widow in his 60's has assets of around £300k, including a 2nd home, rented out(£6k per annum) worth about £120k and acquired 10 years ago for £30k.He wants to ring fence this property by putting it in trust for his son. What are the respective advantages /disadvantages of using a non-settlor interested discretionary trust as against a flexible gift trust, in relation to 1.capital gains tax on the transfer to the trust 2income tax on the rent 3.iht (he is not too concerned about this as he does not expect his estate to exceed the nrb threshhold thank you . . .
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Income tax and extracting dividends
Question: Dear Sirs I am going to set up a limited company. This will have four shareholders (I am one of them) and I am the going to be only director. I will be the only one doing all the work. I would like to take out say £60,0000 to £75,000 per year to compensate my hard work. The other 3 shareholders (also family members) do not wish to take out any money, as it is a long term investment for them. My question is: what is the most tax efficient way to extract money from the new company? 1) I assume it is not through a salary, because this will cause me to pay up to 40% tax and there will also be the NIC contributions on both my company and myself on top 2) I think it is through dividends, but then is it allowed for me to legally be the only shareholder to take out such a massive amount out as dividends and the other 3 shareholders take no dividends? 3) Or is it through making myself self-employed and charging my company (of whom I am the only director) for my time e.g., as consultancy services. This will be tax deductible for the company, and I will of course have to pay income tax the usual way (which will be higher than dividends tax). But at least it seems better than option 1, but is it allowed legally? Thank you in advance for your amazing answers . . .
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Property development tax advice
Question: Dear Sirs I am considering buying a land that I am hoping to develop into 10+ houses. I hope to make a profit of somewhere between £100k and £400k by the end of this project (which will take more than a year or two to complete). My question is what is the best structure to buy this property under in terms of tax that will make most money? shall I carry out this entire project under my name directly, or under a new limited company, or under a limited company owned by another limited company or under an offshore company (I am UK resident domiciled)? My plan is simply to develop it and sell the houses. Kind regards . . .
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Partnerships and IR35 for companies
Question: Hi i understand that IR35 is designed to stop employees using a company when they are effectively employed by one employer. i've recently heard that IR35 does not apply to partnerships. so that a partner in a firm could put thru some of his income streams thru a company that he has set up. this company then invoices the partnership for the work and the bill can be prior shared to the partner concerned. is this correct? . . .
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Proceeds of foreign endowment policy by UK non-dom
Question: I have recently received into my foreign bank account the proceeds of an endowment policy taken out 20 years ago to help fund the university education of my son. As a non-dom UK resident for the past 10 years will the capital gain on this policy be taxable in the UK? Many thanks . . .
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Director benefit in kind if non resident
Question: Director of UK company has become tax resident in France where he will work remotely and visit the UK office for no more that 5 days per month which will be time apportioned for UK/French tax purposes. He has taken his company car to France with him, how will the benefit be treated? . . .
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Maximum SIPP contribution for 2009/2010
Question: What is the maximum single SIPP contribution I can make for tax year 2009/10 to still gain 40% tax relief? I pay higher rate tax and will earn 100K and possibly over 150K income before the end of this tax year Previous single contibutions (no regular payments made) 2007/08 £30,000 2008/09 £81,750 Above exclude employer contibutions of £9,000 p.a.(paid monthly via payroll) . . .
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Home Office Expenses
Question: Is there any restriction on the amount of mortgage interest that can be included in total home costs. The context is apportioning these costs for the purposes of calculating the allowable deduction for use of a room at home as an office. Client has gross costs before apportionment of £11k and 80% of this is mortgage interest. Just seems a far cry from the HMRC allowance of £3 per week! Thanks . . .
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Capital Gains Tax
