Autumn Statement – Share plans for internationally mobile employees

Following the recent consultation process and recommendations of the Office of Tax Simplification, the Government  has announced that legislation will be introduced to reduce the complexity in determining the UK tax and social security treatment of share awards for internationally mobile employees. 

The liability to UK taxation for income realised from share awards will be based on the proportion of the total income that has accrued during a period when the employee worked in the UK.  It is understood that the new rules will apply from 6 April 2014 but we are not sure at this stage whether there will be any transitional provisions so we must await the draft of the proposed legislation.

This move will be widely welcomed as the current rules are extremely complex and the NIC treatment is often different from the tax treatment due to specific social security rules resulting from the EU Regulations or Social Security Agreements concluded with certain non-EU States.

Autumn Statement – £10,000 personal allowance election pledge

As widely expected, the Government has increased the personal allowance to £10,000 to take effect from 6 April 2014.  This represents an increase of £560 for basic rate taxpayers.

The basic rate tax band will be set at  £0 - £31,865 and the phase out of the personal allowance will still apply on taxable income over £100,000 per annum.

Autumn Statement – New Class 3A National Insurance Contributions to top-up state pension entitlement

The Chancellor announced today that from October 2015, eligible individuals will be able to pay the new voluntary Class 3A National Insurance Contributions.  As yet no rate for this new class of contribution has been announced but it will be set at an actuarial rate.

Under the current system, any individual who reaches state pension age before the introduction of the new single tier pension, continues to accrue entitlement under the existing rules whereby the basic state pension is £110.15 per week.  This top-up scheme will be opened in October 2015 and will enable certain pensioners and individuals who will reach state pension age before 6 April 2016 to buy increased entitlement to the state pension.   

This measure will be welcomed by those pensioners frozen out of the new single tier pension which is to be set at £144 per week and which applies only for those retiring after 6 April 2016.

Autumn Statement – Key changes to capital gains tax on UK residential properties

 

1.       As widely anticipated, the Chancellor has announced today that UK capital gains tax will be levied, from 6 April 2015, on gains made by non-UK residents disposing of UK residential property, regardless of value.

This brings the tax treatment of individuals in line with the treatment for non-UK resident corporate entities selling UK sited property of value over £2million after  6 April 2013.  It is anticipated that capital gains tax will now be extended to companies and other entities within the scope of the existing charge which sell a UK residential property of any value.

We have very little detail relating to these proposals at this stage and the Government has announced that it will be consulting on the measures with a consultation document then due out by April 2014.  Possible areas open for discussion are:

·         “re-basing”  by charging capital gains tax only on gains relating to the period from April 2015 to the date of sale

·         applying the capital gains tax charge only to properties acquired after April 2015 (highly unlikely in our opinion!)

 

2.       Currently, the last 36 months period of ownership of a principal private residence is treated as if it were the taxpayer’s main home, regardless of whether he lives there or owns another property.

The Chancellor has announced today that this exemption period is to be halved to just 18 months from 6 April 2014.  This could significantly increase some taxpayers’ capital gains tax liabilities if, for example, there is a delay in the sale of the property.

 

 

 If you require further advice on any capital gains tax issue or planning for future disposals,  then contact    ppeterson@petersonsims.com    or    gsims@petersonsims.com

 

 

 

 

 

 

French Tax Offices honing in on undeclared income for 2011

The EU Savings Directive (2003/48/EC) requires European financial institutions to provide details of income arising from investments held with them to the fiscal authorities of the EU state in which the owner of the income is resident.    Until quite recently, little appears to have been done with this information – especially when only relatively small amounts had been involved – but Tax Offices all over France have been mounting a dogged campaign to track down and impose tax and prélèvements sociaux on income and gains which the owner has failed to include on their annual French déclaration for 2011.              

Residents of France must declare their worldwide income and gains on their annual déclaration even if the income is ultimately exempt from tax in France by virtue of a Double Tax Agreement, for example, Government Service pensions.    Many expatriates mistakenly believe that certain financial products which were tax efficient in the UK, for example ISAs, are exempt from taxation in France, just as they are in the UK.  This is leading to a field-day for the local Tax Offices once they have received notification under the EU Savings Directive that a French resident has income or gains from overseas sources and has failed to declare it on their French déclaration.  

We are seeing an marked increase in tax return audits or “controles” being instigated on 2011 déclarations .  These are often as a result of undeclared income or capital gains relating to an ISA or some long forgotten bank account.   Most individuals, when caught up in a controle, are resigned to accepting that they had made a mistake, usually through ignorance, and sit back to await the bill from the tax office.  However, for those individuals who have sold or encashed unit trusts or similar investments, a far bigger headache awaits.

Under the EU Savings Directive, the financial institution has to report the total proceeds paid to the individual upon sale or encashment– and this is where the trouble starts.   The Tax Offices receive notification of   « Montant total des revenues réalisée lors de la cession, rachat ou de remboursement…. xxx€«  and, unfortunately, the immediate reaction is to treat this sum in its entirety as taxable income. 

For the vast majority of individuals, their units within a unit trust will have been purchased with an original investment and, possibly, dividends which were reinvested over a number of years to buy further units, so there is a cost base associated with the investment.    Put simply, a taxable capital gain is calculated by deducting the cost of purchasing an asset from the eventual sale proceeds.  Unfortunately, the French Tax Offices are seizing on the amount declared under the EU Savings Directive and not factoring in any original or addition cost for the investment.  The result is a large and unjustified tax bill! 

When the Tax Offices are under pressure to garner every last centime, the incidence of controles are going to multiply so it is better to get your house in order now and make sure income and gains from overseas sources, eg the UK, are reported correctly on your annual French déclaration and you will then substantially reduce the risk of a controle because your figures will broadly match those supplied to the Tax Office under the EU Savings Directive.

If you are currently caught up in an audit, require further advice on the issue of undeclared income for earlier years or help with your next declaration, then please contact:

ppeterson@petersonsims.com                                                              gsims@petersonsims.com

Consultation process to abolish S1 certificates for Early Retirees

For many expatriates who plan an early retirement to another EU country, the initial route to healthcare in that country has been via the residual S1 certificate issues by the UK authorities.  This S1 certificate (which replaced the E121 in May 2010) is currently available for up to 2.5 years before actual state retirement age.

Tucked away in a consultation document on Migrant Access to the NHS is a proposal to end the issue of these S1s for early retirees.  Forecasts estimate that these “early” S1s cost the UK around £4 million and, since the UK are not legally obliged under the EU Regulations to issue these, it seems that these are now “up for discussion”!

The UK is the only EU country to offer these S1s to early retirees so it is a fair bet that these are going to be phased out.

This might have been particularly bad news for early retirees coming to France but it seems that, at long last, the French authorities are beginning to recognize their responsibilities in granting healthcare access to those who are permanent residents of France.  Since 2007, the French have played fast and loose with the European Regulations but, under threat of sanctions by the EU Commission, a new department has been established at the CPAM in Nimes to deal with healthcare access requests and it seems that the system is, in the main, on track. 


Those who have previously lost entitlement due to the expiry of an early retiree's S1 but who lacked five years residence qualification, can now apply to have their case re-examined and a spokesman for the service in Nimes agreed that they should now be granted access to the CMU - Couverture Maladie Universelle.  Applications should be made through the local CPAM office but the case will then be referred to Nimes which is to become a facility of "centralised administration" for these applications.

Transferable allowance of £1,000 for certain married couples/civil partners

The Government has announced that a new tax break will be introduced in April 2015 for married couples where one spouse is a basic rate taxpayer whilst the other earns less than their personal allowance and, thus, is unable to utilise all their personal allowance.  In these circumstances one spouse can transfer £1,000 of their unused personal allowances; this would usually only happen because one spouse is not working or working only part-time, earning less than the personal allowance, which will be just over £10,000 in 2015/16.  

This announcement does not mean the couple get an extra £1,000 of allowances – it merely avoids £1,000 of personal allowance of one spouse being “wasted”, which is what happens under current legislation.

The devil will be in the detail when the legislation is presented to Parliament and nothing has been said yet about the availability of this transferable allowance for non-resident taxpayers.

Landlords beware!

HMRC has announced the latest in their ever- lengthening list of initiatives to get non-compliant taxpayers to confess to their sins!

HMRC estimate that, currently, they are missing out on £500 million of tax, as a result of some 1.5 million landlords failing to declare the income from letting activities.

As in all previous initiatives, there is a “softly-softly” approach for those landlords who come forward and declare tax owed from earlier years.  Tax and interest will still be payable, together with penalties – but less severe penalties than if HMRC get to you before you report to them!  

The message is clear – HMRC believe there is a lot of unreported income from lettings and they are using their intelligence software "Connect"to find the landlords who are failing to report their income. 

If you are a resident of the UK, then all of your rental income, even that arising on foreign holiday properties, must be declared and HMRC have found many a non-compliant landlord merely by trawling the holiday property listings on the internet!

If you are in the position of having unreported letting income (UK or overseas) then contact us to discuss your situation at:                  ppeterson@petersonsims.com             gsims@petersonsims.com

Deadline to register for Self-Assessment if liable to Child Benefit tax charge

Since 7 January 2013, if you or your partner/spouse are in receipt of Child Benefit and either of you have total income of more than £50,000 you will be liable to the new High Income Child Benefit charge.

If this applies to you and you are not already registered for Self-Assessment with HMRC, perhaps because your income is already taxed under PAYE, then you are obliged to register by 5 October 2013.

For assistance, please contact ppeterson@petersonsims.com   or gsims@petersonsims.com

Increased numbers of Americans are renouncing their US citizenship

US citizens and Greencard holders residing abroad are, nevertheless, still required to file US tax returns and pay taxes in the US, as well as in their country of residence and the US is one of only two countries in the world that subjects its residents (and Greencard holders) to such tax treatment.  In addition to the taxation implications,  the compliance costs– estimated to average $2000 each year- are placing an increasing burden on overseas filers.

Many US citizens have been contemplating relinquishing their citizenship in an effort to cut tax and compliance costs.   According to Bloomberg, in Q2 2012 just  189 renounced their citizenship but in Q2 2013, that figure had jumped to 1,131.  There has been a similar increase for those who have held Greencards and who no longer envisage the need to retain their Greencards and so are relinquishing them. 

The US FATC (Foreign Account Tax Compliance Act) is also being cited as one of the reasons for the sharp increase.  Americans are finding that foreign financial institutions are reluctant to get entangled with the compliance demands of FATCA and, for many, that is the final straw.

“Delinquent filers” – the IRS term for those citizens and Greencard holders who have not been complying with the requirement to file US tax returns - are facing tougher penalties so if you are in this category, then contact us for assistance.

Email ppeterson@petersonsims.com

‘Tis the season of mists, mellow fruitfulness and 2013 Avis………

As the 2013 Avis have been dropping through the letterboxes of France, there has emerged a trend of higher income tax and prélévements sociaux liabilities being charged on income declared for 2012. 

Firstly, many of the Tax Offices have been applying the treaty exemptions on Government Service pensions and UK rental income incorrectly or, in some cases, not at all, charging income tax and CSG/CRDS, when in fact none is due on these sources of income.

Secondly, whilst the correct income tax treaty exemptions may have been implemented, the Tax Office has charged the prélévement sociaux (CSG/CRDS) in error.

Thirdly, it seems many Tax Offices from Brittany to Cote d’Azur, for 2013 have changed the way in which they calculate the French income tax due on non-treaty exempt income eg the National Insurance retirement pension, other employer pensions and investment income.   Many expats have received a 2013 tax bill which is far in excess of previous years’ tax bills – sometimes as much as 50-60% higher.  This type of increase has come about because it was realised by the tax authorities that the treaty exempt income, whilst not actually bearing any French tax payable by the individual taxpayer, nevertheless should be taken into account in determining the marginal rate of tax on the rest of the taxpayer’s income.  This means the French tax actually levied on all their other income is pushed up into the next tax band.  The calculations for 2013 now take the treaty exempt amounts of income into account, resulting in more tax payable by the individual taxpayer.

If your Avis shows a much higher liability than last year, it could be due to any (or all!) of the above factors.   If you require us to review your Avis, then please contact us on email at ppeterson@petersonsims.com  or  gsims@petersonsims.com   We offer a fixed fee service and will provide a written quote for tax services.

Tel: 05.33.52.09.33

French Government backs off from decreasing turnover limits for AutoEntrepreneurs

Having previously announced, in June, the decision to severely cut the turnover limits for AEs from €32.600 down to just €19.000 for service providers & artisans and €81.500 down to €47.500 for traders, it would seem that this plan has been shelved by the French Government in face of extensive opposition. 

The French financial newspaper Les Echos disclosed that they had obtained a draft of the legislation and there were no references to reductions in turnover limits.  

An FEDAE (the AutoEntrepreneurs’ Federation) spokesman said that if true, it was a victory for commonsense.  Numerous leading political figures have been throwing their weight behind support for the FEDAE action to convince the Government that such restricted turnover limits would be the death knell for the AE regime.  

HMRC Launch "My Tax Return Catch Up" Campaign

Despite the rather tedious title used by HMRC, there is an important point to this campaign.  HMRC are offering taxpayers the chance to bring their tax affairs up to date with favourable terms for those who have failed to file tax returns, provided the taxpayer signs up to this campaign.  

Normally  interest and penalties are levied in such cases and the maximum tax geared penalty is 100% of the tax ultimately due,  or 200% of the tax ultimately due in the case of offshore issues (this applies for 2011/12).  Higher penalties are generally due when there is a lack of openness and willingness to work with HMRC to determine the correct amount of tax due on an individual’s income or gains.   However, if a taxpayer signs up for this campaign, then penalties can be mitigated to reflect the fact that the taxpayer has come forward voluntarily.

Formal notification to HMRC is required before 15 October 2013 with regards to outstanding tax returns for 2011/12 and earlier years, and once the returns are filed the taxpayer is required to pay the full amount of any income tax and/or National Insurance Contributions due, but it is possible to make arrangements with HMRC for additional time to pay these liabilities.  Depending upon circumstances, there may even be tax refunds due!  

If a taxpayer continues to ignore their fiscal responsibilities, HMRC have the powers to seek payment of amounts that they “determine” are due (often with little resemblance to “actual” income) and the taxpayer will be pursued through the Courts for payment, and HMRC even go as far as considering a criminal investigation, if appropriate.   

If you would like to know more about this campaign and would like help with the completion of outstanding tax returns, then please contact us: info@petersonsims.com

From 1 September 2013 – Reductions in French CGT on real property

The French Government has announced a reduction in the holding period of real property – down from 30 years to 22 years – to be able to achieve full exemption from Capital Gains Tax.

In addition, for the period 1 September 2013 until 31 August 2014, a further 25% special temporary reduction will apply and there is the promise of the lessening of the liabilities to CSG/CRDS etc on capital gains realised on real property.

No real detail has yet emerged and the formal legislation will be presented as part of the Finance Bill 2014 later in the year.

G8 and others – No Hiding Place!

In a concerted effort to combat tax evasion, the G8 members have signed an accord for the automatic exchange of information which it is hoped will become the new “gold standard” for inter-governmental co-operation on tax fraud.

Other measures are also in the making: France, the UK, Germany, Spain and Italy have announced that, together with Singapore, the British Virgin Islands, the Turks and Caicos Islands, Montserrat, Anguilla, Bermuda, Gibraltar and the Cayman Islands, they have all signed up to the Multilateral Convention on Mutual Administrative Assistance in Tax Matters.  This means there will be an exchange of information (mostly one way, one would be guessing?!) in respect of bank accounts and assets held in these territories.  The “home” tax jurisdiction will, therefore, have access to extensive detailed information on the accounts and other financial assets of their residents, in order to ensure full disclosure and full compliance.

If you hold any previously unreported accounts or other financial assets, then you are urged to make a voluntary disclosure to the relevant tax authority.  It is always better to come clean now, and accept a reduced penalty for your “co-operation,” than wait for your financial details to wing their way from any of the above tax havens – the pain will be much worse if the home tax authorities find you first!

 

Contact us at info@petersonsims.com for further advice and assistance.

Tidy up those UK bank accounts………

Expats living in France should already be familiar with the form 3916 – Comptes bancaires à  l’étranger – which is filed with the annual tax déclaration and discloses details of foreign accounts held. 

New legislation designed to catch tax fraudsters hiding money offshore (see news reports regarding the alleged activities of ex-Minister Jerome Cahuzac) could also apply to the monsieur-in-the-street who still has the odd UK bank account which he fails to remember or include on the annual form 3916 .  So now is the time to review all those small accounts that you may have opened years ago and which have lain virtually dormant for many years – tidy up your banking affairs and make sure you do not fall foul of the rules. 

If, during this financial spring-clean, you find some accounts which never made it on to your form 3916, then make a voluntary disclosure.  Governments are now particularly keen on sharing financial information about you and you would be astounded how, in just a few clicks of the mouse,  this information is available cross-border to the respective tax authorities.

For those with larger, undeclared,  foreign account balances, the net is closing! The Budget Minister, Bernard Cazeneuve, has told the French députés that if tax evasion is discovered, harsh penalties at the rate of 30% will be imposed on top of the tax due but for individuals making voluntarily disclosures the penalties will be scaled back at just 15% plus the tax due for what he called  “passive” frauds where, for example,  there are inherited accounts containing undeclared funds.  

If you need further advice, please contact us on info@petersonsims.com

French property capital gains tax misery to ease….a little!

It is proposed that from 1 September 2013, in a bid to stimulate the property market, the gains on second homes will attract full exemption from tax after ownership of 22 years, rather than the current level of 30 years, introduced under President Sarkozy in February 2012.

Since that date, property sales have fallen even further than the market expected, as sellers opted to avoid paying capital gains tax by holding on to their properties and hoping for better times.

This reduction in the “holding” period to 22 years will be particularly welcomed by those facing larger gains which, from 2013, attract a surcharge of up to 6% over and above the base 19% tax + 15.5% CSG/CRDS.

Conversely, holding on to prime building land is likely to cause tax issues as the French Government seeks to release land with building potential on to the market in order to stimulate development and jobs.  The detail of this initiative will be included in the 2014 Finance Bill.

If you are considering selling a second property situated in France, contact us for advice on optimising the tax position on the proposed transaction. 

Attack on the Auto-Entrepreneur Regime!

Last week Sylvia Pinel,  the Minister for Commerce and Artisans, announced in the Press that the Government would be proposing changes to the AE regime in the next Parliamentary session. 

Bowing to pressure from the Artisan lobby, she has stated that the AE regime requires modification.  It is likely that the regime will be divided into two types: 

-          those who use it as a primary business vehicle and

-          those who use it for a secondary income source. 

Most of the changes will be directed at the former.  There is likely to be a time limit for primary AEs; the Minister hinted at anything from 1 to 5 years and there will be a restricted turnover limit of anything from 15.000€ to 7.500€ - we must wait and see exactly what is proposed! 

If an AE exceeds the time limit or the turnover limit, they will have to move to one of the other formal regimes or a SARL.

For those who have a secondary activity as an AE, there will probably be little change.  So pensioners, students and the unemployed will be able to continue as an AE indefinitely, assuming their turnover is beneath the proposed cut-off figure. 

Politically, questions are being asked whether it is right to choke off these “early shoots” at a time when the Eurozone is in recession and unemployment figures show a rise of 1,2% in France.  The debate will only hot up as the Fédération des AutoEntrepreneurs wade in with their views on the proposals. 

Watch this space!

Annual Tax on Enveloped Dwellings starts today – and it’s not an April fool!

The Annual Tax on Enveloped Dwellings  (ATED) comes into force today and is a tax levied on high value ( £2 +million) residential  property located in the UK that is owned by a company.  Various corporate vehicles are defined as “owners” and are within the scope of the tax, including investment companies and unit trusts. 

International rugby players will have to pay up…......

The UK Government recently announced a special exemption from UK income tax for non-resident athletes and footballers coming to the UK to appear at such events as the London Anniversary Games in 2013, the Glasgow Commonwealth Games in 2014 or the Champions League Cup Final at Wembley in 2013, following discussions with the governing bodies of these sports.

Jersey & UK sign a FATCA-type Agreement

Like Guernsey, its near neighbour, Jersey has concluded a FATCA type Agreement with the UK in a further bid to combat tax evasion.  The Jersey Agreement, similar to the FATCA Agreements by both parties with the USA, encompasses a special reporting arrangement for individuals who are resident but not domiciled in the UK, an exchange of information agreement and a disclosure facility.

Highlights from the Budget March 2013 - Personal & Expatriate

Highlights from the Budget  March 2013 - Employer loans as a benefit-in-kind 

The exemption for small, employer-provided loans at less than the official rate of interest, will be increased from £5,000 to £10,000 from 6 April 2014.  This is a welcomed move since the current £5,000 limit has been in place for many years and this merely introduces a sensible level at which a taxable benefit-in-kind will trigger.

Tax Evasion - HMRC launch new initiative relating to gains on sales of real property (real estate)

HMRC have announced a new disclosure facility for individuals who have sold second homes, holiday homes or inherited or gifted property, and who have previously failed to report these sales as chargeable disposals and paid the capital gains tax due.   Data from the last census has been used to establish that there are over 2.3 million individuals with real property that is not regarded as their main residence and who, therefore, potentially should be reporting disposals realising gains.

Consultation on the introduction of Micro-entity provisions in the UK

The Department for Business, Innovation and Skills issued a consultation document on the introduction of Micro-entity provisions in the UK with responses due by 22 March 2013.

Micro-entities are very small companies, LLPs and qualifying partnerships, defined in the EU’s Micro-entities Directive as not exceeding two out of three of the following limits:

The Taxman’s net is closing……

The Isle of Man, known throughout the world for its favourable tax regime and for its famous TT mountain course, is about to become the focus for the latest HMRC initiative to counter offshore tax evasion.   The British Government has concluded an Agreement with the Manx Government based on the recent US/UK FATCA Agreement which allows information on bank accounts etc to be shared.

Operating from 6 April 2013, HMRC have launched an IOM Disclosure Facility to encourage investors with IOM accounts to come clean and report the income.  Less generous than the previous Liechtenstein and Swiss Disclosure Facilities, it offers those who have unreported income the chance to make a declaration and such income would then be subject to UK tax and a 10% penalty charge (based on the tax due) for sources up to 2009 and a 20% penalty charge for later years.  Those who do not make a voluntary declaration will face significantly higher penalties and possible prosecution.

The IOM Disclosure Facility will be available until  September 2016 and will cover income arising from April 1999 but is only available to those who are not already under investigation by HMRC.

If you wish to discuss the IOM Disclosure Facility and what it may mean for you, please contact Paulette Peterson.

Meet our new associates in India

Hot on the heels of the Prime Minister's visit to India we have just agreed to work in partnership with Habibullah & Co who have 7 offices in India and international associates throughout Asia.

We are pleased to welcome Vivek and his team to our network and hope we can provide international tax and accountancy services to clients wishing to do business in India or UK.
Details here