Archived Tax Services News

Changes from April 2009

The basic personal allowance will increase to £6,475 from 6 April 2009. Changes from April 2010 Where an individual’s income is below the £100,000 income limit, they will continue to be entitled to the full personal allowance (which has not yet been set). Where an individual’s income is above the income limit of £100,000, the allowance will be reduced by £1 for every £2 above the income limit up to a maximum of one half of the basic personal allowance. Where an individual’s gross income is above a second income limit of £140,000, the amount of their allowance will be further reduced by £1 for every £2 above the second limit up to a maximum of the full amount of the basic personal allowance. Changes to the Residency and Domicile Rules The main changes to the residence and domicile rules were enacted in the Finance Act 2008, which received Royal Assent on 21 July 2008. From 6 April 2008, individuals who claim use of the remittance basis of taxation are not entitled to claim any of the personal income tax allowances or the annual exemption for capital gains tax (CGT). This applies to individuals who are resident but not ordinarily resident in the UK, and to those who are resident but not UK domiciled. Furthermore, Non-UK domiciled individuals who are resident in the UK and have been resident in more than 7 of the previous 9 tax years, may only claim the remittance basis if they pay a £30,000 annual charge. Part years of UK residence will count towards the seven years. There are exceptions to this rule. The tax treatment of offshore structures may also be impacted by these changes. The new rules are complex and you should seek professional advice if the changes are likely to affect you. Transferability of the Nil Rate Band Every individual in the UK has their own Nil Rate Band (NRB), upon which no UK inheritance tax (IHT) is chargeable on death. For 2008/09 the NRB is £312,000. In the Pre-Budget Report of October 2007 the Chancellor announced that, to the extent that the NRB of the first to die has not been used, it can be carried forward and utilised on the death of the surviving spouse or civil partner. Therefore, the NRB is no longer wasted if the couple have not set up wills making use of the NRB of the first to die. The rules had immediate effect and have since been confirmed in legislation under the Finance Act 2008. We do, however, still recommend that individuals prepare wills in order to ensure all tax reliefs and exemptions are fully utilised and their wishes as to the devolution of their estate are documented.


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

Apply
To take advantage of our tax services, you need to be a client of Coutts. If you are already a client, please speak to your private banker. If you wish to become a client, please either complete this form or contact us on +44 (0)20 7753 1963