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Income Tax Questions
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Tax efficient extraction of company profits as a non resident - USERNAME:davebiggam
Tax Question: I would like to clarify the UK income tax and NICS liability for the following scenario: Director of UK private limited company, single shareholder, non resident in the UK since 1997, remuneration history has been to draw dividends up to the higher rate tax threshold, has retained profits in the company that have been subject to corporation tax, performs duties for the UK company overseas. Assuming he remains non resident and has no other UK income, then: What personal tax is payable on future dividends received? Are there any limits as to the level of dividends (in relation to UK tax liability)? If retained profit is taken as salary or bonus, is he liable for UK income tax and NICS on this income and do standard UK tax thresholds/rates apply? Given that his remuneration history has been to draw dividends and at this point is looking to wind the company down (and cease trading in 2 years-he is close to retirement), are there any broad guidelines (or limitations) as to the level of salary/bonus that could be taken over this period. Thank you for your help. . . .
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Tax treatment of royalties and using a company- USERNAME: KmcCreadie
Tax Question: I would like to know how royalties are treated by the IR. I am a writer and at the moment I am taxed as a sole trader and I can average my income over a number of years as it can be a famine or a feast. I have recently agreed to write several books for a fee plus royalty and the royalty could be significant and would almost certainly push me into the upper tax bracket. It has been suggested that I create a company but I don't really understand the advantages of this route. What would be the best way to structure my tax position to protect as much of the income as possible. It is likely to increase my income significantly for a number of years only. Many thanks . . .
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Moving to US - income tax implications USERNAME: ckchowes
Tax Question: Sorry - there is a lot of info here but I think it helps to give you a good picture of our situation! First some background info: We are a married British couple with a 2 year old son. My husband's job is being permanently relocated to the USA and we are moving out there at the start of November 2010 under his L1A visa. This visa entitles me to work in the USA as his spouse although I will need to apply for a separate work permit when we arrive (once I have my social security number) which can take up to 90 days to come through. My husband's employer will be withholding his US taxes and paying this at source (their equivalent of our PAYE). He will be employed and paid by a US employer into a US bank account. Nothing will go through the UK. I have been employed by my current employer for almost 8 years and they have agreed for me to 'take my job' with me for the first 18 months, after which time we will review the situation together. We do not know how long we will stay out there at this point and they do not know whether they would want to continue my employment at that distance beyond 18 months, but if we stay beyond 18 months I would probably want to get a local part time job anyway which fits around our family life. Our visa is valid for up to 7 years and also smoothes the way to applying for a green card (which would be sponsored by my husband's employer should we decide to go down that route). I am currently full time in the UK, but plan to drop down to 22 hours per week when we reach US soil, although i will not be working at all until my work permit arrives. Our questions: 1. Should we/I be paying any kind of NIC - obligatory or voluntary? I read somewhere that we might both have to pay something for the first 52 weeks that we are out of the UK? 2. Are we still entitled to free NHS care if we move back to the UK? 3. Double taxes: we have heard first hand from a friend and a colleague who have moved to the US that this is a nightmare to deal with! I have been told that I will have to pay them because: (a) I am employed by a UK organisation (b) I will not be working full time (c) I am only planning on staying 18 months (this infact isn't entirely true - we don't know how long we will stay yet. We want to keep our options open at this point - we hope it will work out for the long term, but don't want to make it difficult to return to the UK if we don't settle). My employer is flexible about how I'm employed while in the US but favours the option of continuing my current contract with a 90 day 'sabbatical' while I'm unable to work. They would also provide me with financial support while I'm paying double tax, until my refund comes through (which can take up to 18 months?). Is there any way I can avoid paying double taxes? Does receiving my pay into a UK or US bank account have any impact/ influence on this? I know this is probably largely dependent on the factors I've listed above, but here's a scenario: if I terminated my current UK contract and completed a P85 could I declare myself as a non resident of the UK because I'm moving to the US due to my husband's permanent relocation, and then pick up work from a UK organisation as a self-employed contractor, paid into a US bank account and deal with my own taxes in the US, thereby avoiding UK tax? If we returned to the UK within a certain period would I then have to pick up a back-dated UK tax bill? And would my husband too? He will be declaring himself a non resident of the UK on his P85. Does my husband also have to pay UK tax from the outset for any period of time? We don't think he does, but thought we'd ask while we're here! My employment options are: (i) continue current UK contract, pay UK tax and NIC at source, pay US tax bill with financial assistance from my UK employer which would be returned upon receipt of the refund (ii) continue current UK contract but get paid into a US bank account - would I still have to pay double tax? (ii) terminate current UK contract, collect P45, declare myself non-resident of the UK on my P85, pick-up self-employed work from UK organisation once in the US I could be asking questions or suggesting scenarios here that are absolutely not allowed, and we know you can't tell us about the US side of things, but we are so naive on this subject that we have to ask the questions! We want to make sure we are doing this properly and in a way that carries minimal financial impact and risk, but also provides the easiest transition into staying in the US or indeed moving back to the UK! I know we can't have it all ways, but we are trying to figure out the best way to proceed in our situation. Any information you can provide, even if it falls outside of the specific questions I have listed here but seems relevant, would be very much appreciated. We know you can't advise us on the best option for my employment situation, but we need to understand the implications of each scenario and also whether my husband needs to pay anything in the UK. Many thanks in advance. . . .
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Inheritance tax questions - USERNAME: milcurr
Tax Question: I have a life interest in property which will be part of my estate when I die, and IHT will then be payable estate. I assume the IHT on the life interest portion is paid out of the property subject to the life interest rather than out of my own assets? But which part of the estate gets the benefit of the Nil rate band? If I now make a gift or £100,000 to a discretionary trust, while still having a full Nil rate band available, do I have to pay 20% tax when the gift is made or does it simply reduce the Nil rate band? And if it does, does it reduce the NRB permanently or does the 7 year rule apply? Thanks! . . .
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Protecting overseas earnings from UK tax USERNAME: anon
Tax Question: I am UK domiciled, resident and ordinarily resident and provide consultancy services through my UK company. All my work is for overseas clients, mostly in Russia and the Middle East. If it would take me out of UK income tax, I could arrange to spend at least 75% of my time outside the UK for a period including a complete tax year. I do not envisage becoming tax resident in any other country. If I remain an employee of my UK company I believe NICs would be payable for the first 52 weeks only, during which period I could keep remuneration low. I would then pay out most/all profits as a bonus to minimise corporation tax. Would this route be effective and, if so, what would I need to do to implement this? Alternatively, would it be better to set up a company elsewhere that would be my employer? If so, where? . . .
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Partnership tax planning USERNAME:igcaccounting
Tax Question: A profitable marketing agency has had partnership status since commencement. Now looking to adopt ltd company status but unfortunately faced with sizeable Income Tax and Class 4 NI bills for 2009 / 10. Any practical advice / opportunities for the partners to minimise the 2009 / 10 liabilities? Thanks . . .
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Remittance derived from untaxed foreign income USERNAME:Pueblo
Tax Question: The situation concerns a non dom who pays tax on an arising basis. He has an offshore account with untaxed income. He invests in a portfolio of funds in the current tax year, pays all taxes that are due. Can he remit that income (where tax has been paid) into the UK without any tax liability? . . .
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Generating an income tax loss on CFD's - USERNAME:mancival
Tax Question: I'm a res/non-dom, living and working as employee in London since 2003. I've earned quite good salary in the last 4 years, paying a large amount of taxes (taken at the source by my employer) to UK Government. Recently a consulting firm contacted me explaining that I could invest money in a LLP exploiting artists licences, and that the costs of exploitation of such licences would create a sort of loss for the LLP, therefore allowing me to claim tax refund for the last 4 years. I think these structures have been around for a while, but do they still work if structured properly? Inspired by the above proposal, I thought that a simpler and more effective structure could be the following: I enter into a CFD contract with an offshore company owned by an arm's length person, the CFD being structured in such a way that I make (with high probability) a loss and that person makes (with high probability) a gain? Do you think I could ask refund for past taxes against such loss? How could I optimise this idea? . . .
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Non resident vesting of share options and UK tax USERNAME: Pioroman
Tax Questions: Hi, I lived in the UK since 1993 till August 2004. In August 2004 I relocated to France. I am therefore not a UK resident any longer and I am not planning on returning to the UK either. I have no sources of income in the UK. Now, I have been working for company in the UK since 1999 and I am still employed by that company but since 2004 I am working for the french arm, based and paid in France and in Euros on a french contract. While employed by the company in the UK (since 1999) I got granted stock options every year. Those stock options would vest 20% the first year and 1/60 each subsequent month after the first year. In the November 2006, two years after having moved to France, I exercised and sold 5 lots of shares totaling 8000 shares, making a gain of ~90,000$ US dollars (£41K.) My company has taken tax away (£9K)from the gains (as well as employee and employer NI) and passed this onto the IR. The tax that has been taken away is at BR and they have not taken into account the fact that the share were vested while I was in France. Q1. Were I supposed to get PA (£5035 in 2006/2007) relieve on the gains ? and only be liable to pay about £8K tax instead of £9 based on £41K taxable income. Q2. Were I suppose to be only liable to pay tax on the gain of shares that vested while I was in the UK. The remaining of the taxes being due in France. Thanks in advance for the answers... . . .
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FHL loss offset against previous year
Tax Question: I have losses under the furnished holiday home scheme in 09/10 and I would get more relief if I took these losses against my 08/09 income and not 09/10. Firstly can I do this and where do I do it on my tax return? many thanks . . .
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QROPS/SIPPS tax questions USERNAME:andreaapb
Tax Question: We have lived in Italy for 8 years; have no intention of ever returning to UK except for the odd holiday. Our children attend school here, one was in fact born here. We have disposed of all UK assets to off Shore Company in IOM. The only remaining attachment to UK is a pension. We are led to believe that in order to become EX DOM we need to deal with the situation of the pension. My husband has just turned 61 and no longer draws any salary from the UK, subject to PAYE or otherwise. The pension is a self administered pension scheme, which was established in 1991 through Scottish Equitable, who showed very little interest and subsequently passed on there pension book to an operation called Hazell Carr. In April 2006 because of what they termed as 'A Day' Hazell Carr resigned as administrators and passed over the responsibility to my Husband, who is the also the sole beneficiary of the pension. The situation had the blessing of the Inland Revenue, and they have received accounts on an annual basis, as it is a LTD company entity. My husband has sole responsibility for the bank account. After discussions with people in the IOM, It was suggested that the fund be transferred to the IOM in the form of a SIPS through the QROPS channel, and full written permission has been gained from the HRMC. The pension fund is some £250,000. Whilst we have had the benefits of the offshore SIPS explained, we are uncomfortable with certain aspects. From experience from previous administrators if we wished to invest into commercial property, we get the feeling that as discussions on this subject of this pension, are now on their 10th month any process is painstakingly long! If the administrators do control the account, any seller of commercial property would have got bored, died or sold it to some one else. Your see our concern. Since it has been a SAPS/SIPS all of these years, there is only 1 beneficiary (my husband), he has controlled the bank account, with complete knowledge of the Inland Revenue all of these years. He does not feel comfortable handing over control. 1. Does he have too? 2. If so why and is there any way around it? 3. Is it possible for us to form 'our own pension scheme or similar' 4. If there a possibility of winding up the present scheme and taking the money and run, so to speak? Are the any penalties if it is possible? We would also add that whilst we understand a SAPS/SIPS can invest into property etc, the provider seems keen on more financial based investments which we are uncomfortable with in today's volatile markets what would be the outcome if THEY invest badly, do we lose out or are they contracted/committed to fulfil there annual prophesy? . . .
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Purchasing an overseas property tax efficiently
Tax Question: Property ownership abroad. We are looking to buy a flat in Ireland for holidays over the next 10 years (and if feasible to rent it out for short periods ) and possibly to retire there in 10-15 years. I wonder if you give some advice on the best way to hold such property for UK tax purposes. The following may also be useful; my wife is non-uk domiciled (Irish) and my children are UK domiciled (Irish/British citizens). I am UK domiciled but have British/Irish citizenship (the latter due to a grandparent). All parties may be potential beneficiaries of a Foundation and Trust, if they become non-uk resident. These vehicles were established by a non-uk domiciled person some years ago. Thanks . . .
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Non UK resident structuring loan finance for UK tax deduction
Tax Question: I am HONG KONG (non UK) resident considering buying property in London, UK. I would most likely buy to let the property and plan to finance around 50% by borrowing in Hong Kong in Hong Kong dollars and then transferring the total amount to UK sterling to purchase the property in UK. I am try to ascertain how best to do the financing in Hong Kong so that I can deduct the interest payment against the rental income when preparing UK annual return But for the purpose of providing annual returns in the UK, what do I need to show as documentation as proof of the interest payments. Say can I borrow off a personal friend in HK or what is the best way for me to borrow this money so as to satisfy the requirements when filing UK tax return. what do you think? Thanks . . .
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Defining the "power to enjoy the income" for the transfer of asset provisions
Tax Question: Defining the "power to enjoy the income". Suppose I give a contract loan to an off-shore company owned by a trust of which I am a beneficiary, and the Co pays me a fixed interest taxed in UK. Is a loan (on commercial terms) a "transfer of assets"? The HMRC language on "transfer of assets" mentions disposals, purchase of shares, settlements, gifts, etc., but not loans. As a separate question, the HMRC has a "transfer of assets provision" that may tax me on all income (and capital gains?) made by the Co using my transferred funds, if I have power to enjoy them. (From HMRC: "An individual may have power to enjoy the income arising to a non-resident as a shareholder of an overseas company, as a beneficiary of a non-resident trust, or by benefiting in some other way.") The Co shares are fully owned by the off-shore trust (I am a beneficiary of the trust). But I have no power to tell the directors of the Co to make a distribution to the trust, which would allow the discretionary trustees to pass the income to me. Does it mean that "I have no power", and the "provision" would not apply to me (until a real distribution is made out of the Co)? . . .
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Tax treatment of pension income for former US resident
Tax Question: As a expatriate of the UK but have lived in the US for the past 40 odd years and derive my income from SSA and a company retirement. If I should return to live in England for my retirement years, would I have to pay taxes to UK as well as USA. My income is minimal and so is my savings. I am 72 years of age. . . .
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Dutch employee and UK tax?
Tax Question: UK limited co. has a Dutch employee working for him. All the payroll and tax deductions are handled by a firm of accountants in the Netherlands and the company makes payments to the employee and the Dutch tax authorities from the UK. The co. also makes pension payments for the employee. Are there any tax deduction issues in the UK associated with these employee costs? . . .
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