Royal wedding cant, hypocrisy, and the taxpayer

Wills and Kate are getting married and I wish them every happiness. I hope this Royal wedding will be a great show too, although they should have it just as they want it.

Of course there is the usual whining from commentators and journalists that the taxpayer should not have to pay for this, and the Royal Family should stump up a good deal of the cost.

Well, like it or lump it, but the Royal Family is a tremendous asset to the United Kingdom. Overseas media take a huge interest. The Royals are still worth a huge amount in terms of exports and attract millions of tourists from around the world, many of whom will come especially for the wedding. Manufacture of memorabilia is already in full swing, and William has made sure by use of her engagement ring that the Diana factor will feature heavily. Money is going to pour into our country from around the world. Yes, a lot of people are going to make serious money and yes, a lot of tax is going to be raised by the Exchequer and it will be a great deal more than the cost of running the wedding including all the policing and security. It is probably a much better money-raiser than the Olympics.

No money is going to be diverted from hospitals or welfare because the tax raised is going to be extra money. I am less a Royal fan than I was, but let us not get diverted by those who have an agenda other than their pretence of social conscience.

Let us enjoy the Royal wedding and the financial benefit the Exchequer, our clients and we will derive from it.

HMRC tackles the medical profession with the Tax Health Plan

We professionals in the tax business are fond of offering tax health checks to prospective clients, but now we should be offering health checks to medical professionals, who are the target of HMRC's latest campaign to collect tax from perceived miscreants. I am sure the Revenue is not suggesting that all in the health business are into dodgy dealing and falsifying their tax returns, but presumably there must be a supposition that “extras” such as giving references to patients, signing passport applications and getting payments from pharmaceutical companies slip through into doctors' pockets unnoticed by their accountants or tax advisers. Those targeted who have something to report must notify their intention to do so by 31st March 2010 and have until 30th June 2010 to have made the disclosure and arranged to pay any tax that is due.

Given that we have had two opportunities for people to disclose their offshore bank accounts and we have the ongoing Liechtenstein Disclosure Facility, the HMRC tactic is simply to concentrate the minds of a particular group of taxpayers. I doubt that doctors are any worse or any better than many other trades or professions. I assume this must be the first of many initiatives targeting various sections of the business community.

Who will be next on the list? Pharmacists? Tyre fitters? Plumbers? Wheel-tappers and shunters? Accountants and allied professions? It is a novel idea to put each sector under the microscope, but it will take an awfully long time to get through the list. I hope HMRC gets some tax dodgers to confess, but doubt the tax take will be significant from each campaign, especially given the disappointing response to the recently closed second campaign on offshore accounts.

© Jon Stow 2010


Details of the HMRC Tax Health Plan

A week of curiosities and a valuable reminder

It has been a strange week. On Monday I went to see a client to collect his tax papers, only to find that they were in a locked cabinet to which only his wife had the key, and she was out. It was a short meeting as a result, and I did wonder why my client had not telephoned to save me the journey.

Two less eventful days ensued, and I went to my monthly local meeting of tax practitioners on Thursday. “Tell me, everyone” I said, “what do you guys do in the way of marketing?” Six faces looked back at me blankly. “Marketing? We don’t do marketing. We don’t need to because we always have enough to do.”

I was amazed, and actually even felt a little foolish for a moment. After all, I spend quite a lot of time marketing. I have one local targeted ad, and apart from that I work on my website, my blogs, the social networking sites, Twitter and face-to-face networking. All this results in work coming in, which compensates for the occasional client of mine who finds it necessary to dispense with my services. There is always some attrition. When people leave me it never seems to be because they have gone off my firm or its service. People move and like someone local to look after their tax affairs, or they sell up everything and move abroad.

How do my colleagues not have net losses of clients? It can only be because they are longer established than me (a mere seven years) and get plenty of referrals without looking for work, or they are good at client stickiness and find it easy to keep their revenue from each increasing year on year. I admire that, and am even envious though I worry about their complacency. Apparently any sort of networking is alien to their natures. I enjoy it and it gets me out, gives me a chance to feel useful in connecting people, gets me work and avoids the loneliness of some small business owners.

I went back to the office to puzzle over an email from a client’s wife. “I haven’t time to send you my husband’s papers so that you can do his tax return as we are going on holiday for the whole of August and we need his refund by September”. Now, hang on, she lives a long way from my office and I cannot easily take the ferry to do my customary house visit, but we have broadband and live in an electronic age; hence the email. Said lady then goes on to ask me how to fill in the Return by requesting a technical calculation for last year. I answered her question of course, and wish her the best of British with the Foreign and Non-resident pages which are hardly logical even to us professionals (we always seem to have to do work-arounds to get them to make sense). I have not had a response to my somewhat injured one, but am not holding my breath. Needless to say I advised her that if she sent me the information she could have emailed copies of the Return and accounts for approval easily by the end of July. It would be inconvenient but I will always try to be flexible to meet my clients’ needs. I am not holding my breath, though.

Late on Thursday, I saw another new client for the first time. It turned out his previous adviser had died, and no one seemed to be running the practice now. I think the accountant was unqualified but nevertheless may have been very good at what he did. The client had obviously found his service good. In these tragic circumstances it is a reminder that we should always allow for someone to take over the reins of our business if we become sick or die suddenly as this guy did as a result of an accident. We owe it to our clients and also to our families as it is better to have a saleable business as a going concern than a business which is as dead as the owner.

If not lessons, I feel I have had some useful reminders. I must check that my nominated successor is still happy to run my practice in the event of my incapacity as I have directed. I will call her to check.

New tax amnesty and old habits

We are starting to hear a little more about the new tax amnesty in the UK, called by HM Revenue & Customs the “New Disclosure Opportunity (NDO),” which follows on from the 2007 amnesty. Now we know that since the original amnesty, which followed on from HMRC’s victory in the Courts over the UK banks defending unsuccessfully their Channel Island branch customers, HMRC has come by a lot more information. Indeed I can infer from what I have heard on the grapevine that the acquisition of information concerning the Lichtenstein accounts has borne fruit, and will continue to do so. Therefore I think that the NDO is aimed at this particular tranche of (non) taxpayers and may be the reason for the bullish £2Bn tax take punted in the Daily Telegraph report.

I guess my advice to the miscreants would be to grab the 10% fixed penalty (plus interest on late-paid tax) while they can; of course my advice is always to come clean because at least in theory, the more tax the fraudulent evaders have to pay, the less the tax burden for the rest of us (I wish). To my mind, failure to pay thousands or millions in tax which is properly due to the Exchequer is little different from robbing a bank or stealing millions in gold bullion.

There are those who have been caught already between amnesties, which is bad luck or just desserts for not having come forward the first time. There really will be no excuse for lying low in the next amnesty, and to be honest (me, not them) they would be well advised to talk to their tax advisers, accountants or lawyers now in readiness to make complete disclosures. If they do not, or if the disclosures are incomplete then it may well mean jail time (being British and pedantic I would like to say “gaol time”). Still, it might be hard to persuade die-hard evaders to put their hands up.

I am not taking the Revenue’s side so much as the side of truth and honesty. That said, if anyone wants to speak to me with a view to their coming clean on their undeclared income and gains, I will be pleased to represent them in dealing with HMRC as long as I am satisfied they wish to make a full disclosure. Naturally I offer a very discreet and totally confidential service.

Blearsy-eyed!

We read here that Hazel Blears is to pay £13,332 on the sale of a second home. How is she going to do this? Presumably her accountants or tax advisers got the documentation right so that she successfully avoided a liability by making the appropriate election. The only way she can get HMRC to accept the money is by saying she made an error or worse, deliberately misled them. She will not be happy if they charge interest and penalties in addition to the CGT.

Perhaps she thinks the way to pay this voluntary tax is to just send a cheque. If HMRC cannot match the amount paid against a current liability, they will want to just send the money back. Remember that following the change in treatment of offshore income received by non-domiciled residents in UK, advisers on US tax told their UK resident clients that they should pay their tax due in the UK on US and worldwide income received in the period 6th April to 31st December 2008 before the end of December 2008 so as to have it matched with and set off against US tax due for 2008. The problem with this was that UK tax would not have become due before 31st January 2010, and HMRC's reaction was to try to repay the tax, thus defeating the object. Does Hazel know something we don't, or is this just political expediency without worrying about the consequences? I can guess, but answers on a post card please.

Update 14th May

Hazel Blears might have read my blog yesterday! I heard on BBC radio this morning that because HMRC would not be able to accept a cheque if they could not allocate it to a known liability (given that she has done nothing that she was not legally permitted to do), an official from HMRC was summoned to Westminster last night to accept the £13,332 on behalf of the Public Purse. I think it might have been better used if paid to a charity for the homeless. This is gesture politics at its worst, and really, you couldn't make it up, could you?

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Domicile......again

Most people probably have only a vague understanding of the meaning of the word "domicile" and even fewer realise that it is a distinct legal concept, and one which may affect a number of people considerably in determining the amount of tax they pay.

So, what is domicile? Domicile is essentially a legal concept which is also recognised in those countries who have inherited their legal system from Britain, and that includes the USA in this case. It is something everyone has, that one is born with, and is hard to change. Domicile is normally determined at birth, and for UK purposes in most cases it is inherited from one's father. It might not be the country in which one was born, but the country which one's father considered his permanent home. In the case of a person who was illegitimate or whose parent's divorced during his or her minority, there may be different factors to be considered.

Partly for historical reasons and partly to recognise continuing minor variations in the law to be applied, no one is actually domiciled in the United Kingdom; rather a person may be domiciled in England or Scotland, for example. The concept is enshrined in long-standing case law and does not always sit well with the equal opportunities climate.

It is possible to change someone's domicile with a good deal of difficulty if that individual severs all ties with the country of domicile of birth, establishes a home in a new country, perhaps buys a grave plot there and spends many years in the proposed country of domicile of choice. Unfortunately, when people become older and their health deteriorates, they may come back to their domicile of origin (the one they were born with) for treatment and ruin everything. Dedication is needed.

At this point you are thinking, "Could this affect me?" Well, for those who have domiciles abroad but who are resident in the UK, they have hitherto had the opportunity to pay much less tax in the UK than the rest of us, but they may not have realised it. "Unfair!" you may cry, but nevertheless it is true. Anyone in this category should speak to an adviser about back tax years and whether a repayment of tax might be in the offing.

However, the law changed in April 2008 and anyone who thinks he or she might be resident in the United Kingdom but not domiciled in a UK country may well be affected and should seek urgent professional advice because the UK tax regime will become much harsher.

In the simplest terms, prior to April 2008 a UK resident non-domiciled individual was not taxed in the UK on income and gains arising abroad but not remitted to the UK.

Unless such individuals are prepared to declare and be taxed in the UK on their worldwide income the new rules from 6^th April 2008 impose an annual charge of £30,000 on non-UK domiciled or not ordinarily resident individuals who claim the remittance basis of taxation, if they have been resident for longer than seven out of the past 10 years (unless their unremitted foreign income and gains for the tax year in question are less than £2,000).They remove income tax personal allowances and the capital gains tax annual exempt amount from those who claim the remittance basis (unless their unremitted foreign income and gains are less than £2,000). As I said, this is a brief summary. There is a lot more to it than that.

There is a need to plan for the future. We all know business owners and others living in the UK whose families originate from the Commonwealth, mainland Europe and North America and perhaps from elsewhere. They may have been born within UK shores, but their fathers may not have been. The law rubs both ways. Given that those of us who are domiciled within the UK might have a hard job convincing the Inland Revenue of our overseas domicile even if we have lived in Marbella for 20 years, so someone whose family is from Hong Kong may still retain domicile there even if that person has been in business in England for many years.

The above is only summary of the current situation, which is actually quite complex, and it is believed to be correct at the time of writing. To reiterate, if you believe this issue affects you or may do in the future then you should seek professional advice.

© Jon Stow 2005, 2007, 2008