In the first article in our International Client – January 2020 publication, we look at the latest news for our international clients based both in the UK and overseas.
UK General Election
Boris Johnson and the Conservative Party won a majority of 80 in the UK’s General Election on 12 December 2019. Johnson had run his campaign on the promise to ‘Get Brexit Done’ and it appears certain that the UK will leave the EU by the current 31 January 2020 deadline.
Given the size of their majority, the Conservatives can also be expected to implement the tax policies set out in their manifesto. These include:
- No increase in the rates of income tax, VAT or National Insurance contributions.
- An increase in the National Insurance threshold to £9,500 in 2020, with planned future rises to £12,500.
- A review of Entrepreneurs’ Relief.
- A 3% Stamp Duty Land Tax surcharge on non-UK resident buyers purchasing UK residential property. This is presumably in addition to the 3% surcharge for those purchasing second homes and investment properties.
- Cancellation of the planned reduction in corporation tax rates, retaining the current 19% rate for the time being.
- New laws to target tax avoidance and evasion: in particular, measures to prevent profit shifting by international companies.
The government has announced that it will hold its first Budget on 11 March.
Letters from HMRC about offshore funds
As noted in our September issue, HM Revenue & Customs (HMRC) has been sending letters to individuals it believes hold assets and bank accounts overseas. These are designed to encourage taxpayers who may not have correctly reported their overseas income or capital gains to take steps to put matters right.
It now appears that HMRC has been sending further letters in respect of investments in offshore funds. Individuals with such investments, including those who complete tax returns, may have made errors in reporting income and gains arising from them. Two common mistakes are as follows:
- Where an investment is made in a fund with ‘reporting fund’ status, individual investors must also pay income tax on any ‘excess reportable income’ (ie income arising within the fund but not distributed). However, the statements they receive may not include details of this income.
- Where an investment is made in a fund that does not have reporting fund status, any gain arising on a subsequent disposal is subject to income tax rather than capital gains tax. Again, it may not be clear from the statements received that this is the case.
We would advise anyone with such investments to seek advice if they believe that historic errors may have occurred.
We understand that HMRC has sent these letters to many taxpayers, including some who do not actually hold offshore fund investments. Taxpayers who receive a letter and have not made investments in offshore funds should not be unduly concerned.
Letters about ATED and non-resident landlord returns
HMRC has also been contacting companies listed at the Land Registry as the owners of residential property. Where such companies have not been filing Annual Tax on Enveloped Dwellings (ATED) returns or non-resident landlord returns, HMRC has issued enquiry letters. However, in many cases no filings will be required, for example because properties are held by companies in a nominee capacity. We would recommend that such letters are not ignored, and that responses are sent to HMRC explaining the position.
Making Tax Digital
Following the introduction of Making Tax Digital (MTD) for VAT (which involves businesses needing to file electronic returns quarterly), HMRC is now moving forward with the roll-out of quarterly reporting for income tax. This is currently expected to be as early as April 2021, although taxpayers will need to undertake preparations in advance of this date.
The income tax provisions may also affect international clients, particularly those who hold rental properties in the UK. If you would like to know more about how MTD will affect you, please speak to your usual Saffery Champness contact.
Taxation of cryptoassets
HMRC has recently updated its guidance on cryptoassets. The guidance covers how businesses are taxed, and where HMRC considers cryptoassets to be located for tax purposes – which may be particularly relevant to individuals taxed on the remittance basis.