Archived Tax Services News

Pre-Owned Assets

An important change took place on 6 April 2005: assets, which have previously been given away and removed from an estate for inheritance tax purposes, may now be liable to income tax. Although there are a number of exemptions, anyone enjoying the use of an asset that they gave away on or after 18 March 1986 could be liable to the new charge. An election out of the new regime must be made before 31 January 2007. Therefore, historic inheritance tax planning exercises should be reviewed and bespoke advice to mitigate death duties has become more popular.

European Union Savings Tax Directive

On 1 July the EU Savings Tax Directive came into force. It applies to interest paid from banks and financial institutions in all EU countries but other countries have introduced similar rules by way of bilateral agreements with the EU. A full list of countries that are participating is attached [link to page below]. The directive is essentially an agreement between member countries to exchange certain information about interest payments or to withhold tax from it. The directive impacts on all residents and some trustees resident in an EU country who receive interest from a financial institution in the EU or one of these countries. Various options for the recipients of interest exist.

Dual-Employment Contracts

The Inland Revenue recently announced that there would be a change of emphasis in the way that their offices approached enquiries into dual contract arrangements.

Dual employment contracts are popular with foreign domiciled employees who work both in and outside of the UK. Duties performed outside of the UK can be salaried under an overseas employment contract, if the duties are separate to those carried out in the UK. The overseas earnings are only taxable when the money is remitted to the UK. The Inland Revenue now intends to fully investigate the facts and circumstances of some dual employment contracts, and in particular, they intend to assess the commercial rationale and context of each case. In some instances, this may even involve reviewing telephone records to ensure that urgent queries have not been dealt with in the UK. The full text of this bulletin can be read at http://www.hmrc.gov.uk/bulletins/tb76.htm#e

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