The general headlines are as follows:

• Corporation tax – historic reduction in corporation tax rate to 20% from April 2015, small company and main company rate effectively merged from April 2015.
• Personal income tax – £10,000 personal tax free allowance from April 2014, rather than April 2015.
• Loans to participators – legislation introduced to tighten up areas where the government believe there is abuse of the current provisions.
• Property Taxes – SDLT avoidance – retrospective amendments (which are in line with the Chancellor’s warning last year) to the legislation introduced to stop abuse of transfer of rights rules.
• Partnerships – consultation to look at disguised employment within LLP’s and manipulation of profits/losses in partnerships generally to create tax advantages, for legislation in Finance Bill 2014.
• Bank levy rate – to increase to 0.142% to ensure banks don’t benefit from the corporation tax rate reduction.
• Seed Enterprise Investment Scheme (‘SEIS’) – extension of CGT relief for reinvestment from 2013-14 gains where those gains reinvested in SEIS
• Employee share ownership schemes – extension of income tax and NIC reliefs and CGT relief for sale of businesses to their employees.
• Employment allowance – first £2,000 of NIC bill for every company to be cut from employer NIC contributions from April 2014, as a credit against secondary class 1 NIC liabilities.
• Employment taxes – beneficial loans – £5,000 interest free loan to employees to be increased to £10,000 for 2014/15 tax year.
• Fuel Duty – proposed September 2013 increase has been cancelled.
• Tax avoidance and evasion – specific targeted measures introduced (for example on loss buying arrangements) on avoidance and further collaboration with Isle of Man, Jersey and Guernsey on information sharing and evasion.
• High risk promoters – consultation over the summer to look at activities of promoters with a view to legislation in Finance Bill 2014.
• Offshore employment intermediaries – consultation to ensure correct income tax and NIC treatment of these entities, with a view to legislation in Finance Bill 2014.

In general, though perhaps not unexpected, the 20% rate of corporation tax should be welcomed and should help attract business to the UK.

As now appears normal practice, there is a long lead time set out for many of these provisions to allow for consultation prior to legislation in Finance Bill 2014.

We are able to offer an excellent way to shelter gains on Land that used to be referred to as “The Trading Partnership”.

This very simple method is excellent for any asset that is going to go up in value in the future but it is not certain whether it will or not. Land that is likely to be granted Planning Permission is the main use of this method due to the uncertainty of the planning process and subsequent outcome.

An offshore company is set up whereby the shares are owned by an offshore Insurance Bond. This structure keeps the proceedings at arms length and you will not be the recipient of the uplift in value – the Bond will be. An option is now taken out over the land by the company and the planning process is started. If the planning is successful the company will exercise its option the day that the land is sold to the developers, this retaining profits in the company, tax-free in the Isle of Man.

An example is below:

Land is valued before Planning  – 100k

Value after Planning – 7 Million

Option taken out for – 400k

At time of sale the offshore company exercises it’s option for 400k and sells the land to the developer for 7 Million.

Tax is paid on 400k – 100k = 300k at 211013 rates that would mean tax at 28% = 84,000

Profits  6.6 Million tax-free to you by loans from your company or you can become non-resident for one year and receive your profits tax-free also.

Tax Saved – 1, 848,000

If this could apply to you or a friend, please call us on 0845 052 3787, NOW

Non Residency Rules are being scrutinised and clarified. It looks like the 90 day rule will still apply as be the main test of Non Residency, but additional tests will also be made to determine your ongoing links with the UK. Formerly a popular method of tax avoidance for owners of Limited Companies was to accumulate profits within the limited company, pay the corporation tax at 20% and once sufficient funds had accumulated, the owner of the shares would become Non Resident for a year and take his or her dividends out of the company tax-free. It seems as if there may be some alteration of the Non Residency Rules in the upcoming Budget to prevent this practice.

The Big 4 Accountancy Firms and Tax Avoidance Schemes

Recent figures release show that of the 426 Tax Avodiance Schemes disclosed to HMRC since 2009, 79 have been devised and offered by the Big 4 accountancy firms. PWC have disclosed 25 Schemes, KPMG have disclosed 20 Schemes while both Deloitte and Ernst and Young have disclosed 17.

The heads of all 4 firms were asked to appear before the Public Accounts Committee to explain their actions and defend claims that these schemes damage the interests of the country. The heads of the firms argued that there were many wrong assumptions about these schemes and that they were proud to be serving their clients the to the best of their  abilities.

Once again this is a game whereby the Government know that we have an unfair tax regime and that it is harmful to the country to penalise those who create prosperity. In actual fact the ability for firms to provide tax planning keeps industry in the UK and attracts foreign interests to this country, thereby contributing positively to the economy.

Starbucks Warns PM

Starbucks has denied that they have put investment in the UK on hold after fresh attacks on their tax affairs.

David Cameron stated a the World Economic Forum that companeis that avoided tax should “wake up and smell the coffee”. Naturally Starbucks took this as direct criticism of their own tax affairs.

Kris Engskov, the UK Managing Director of Starbucks met Ministers at Downing Street to resolve matters. As part of the PR campaign in the wake of the media furor over Stabucks tax affair, Starbucks have already agreed to pay significant amounts of tax over the next 2 years despite being totally within their rights to legally not to do this.

Apple’s Tax Avodance

Apple is reportedly moving 1 Billion US Dollars to a Tax Haven each week. In its attempt to slash tax bills Apple has said that it moved $11 Billion to Tax Havens in the last 3 months of 2012. Analysis of their UK accounts suggests that they paid $14.4 Million in tax on a tunover of just $1 Billion. A review of their US accounts sugegsts that they paid $6.7 million in tax which would mean a turnover of $2.2 Billion.

Tax Avoidance Scheme Blocked by Tribunal

A high risk tax avoidance scheme that was to shelter over 110 million pounds from tax has been defeated by a Tribunal. The scheme promoted by Matrix Securities was designed to invest in vaccine development. A Partnership was set up and investors added 30 million pounds of their own cash and an additional 80 million pounds of bank loans was used to boost the fund. However, only 14 million pounds was actually spent on the vaccine research. The tribunal naturally ruled that investors were entitled to 14 million pound in tax relief but not on the rest.

This ruling further underpins the fact that all tax planning must be of a commercial nature and transparent.

The media build up for the Autumn Statement over the last few weeks had seemed like a slow cranking up of the news screw to prepare us all for a lot of bad economic and tax prospects to be announced. However, when it came it was actually, all things considered, actually rather promising. Well as much as anything can be in this world economic environment.

The predicted increase in the annual deficit to £138m is actually expected to be a decrease to £108m. We have higher employment than the other major G7 countries and growth forecasts of 2%+ from 2014 onwards.

The Chancellor is not proposing any new taxes but has moved things around a bit in a quite interesting way. The headlines will be on an additional increase in the personal allowance to bring it up to £9,440 and that the planned rise in petrol duty has been scrapped. Also of interest is the increase in allowed draw down from pension funds, though more interestingly is what is going to happen from 2014 onward, which indicate that many of the rates and allowances are becoming less frozen:

The £10,000 personal allowance will come quicker than expected

• The first real increase, by 1%, in the starting point for the higher rate band
• A repeated increase in 2015 for the higher rate band.
• The IHT nil rate band will increase by 1% in 2016.

For businesses the Chancellor has also announced that the full rate of Corporation Tax will fall to 21% in 2014 and Annual Investment Allowance for capital asset purchases will be raised tenfold to £250,000 this 1st January 2013 (for 2 years).

To pay for all this tax relief given on pension contributions and benefits will be reduced in 2014. The Annual Allowance is reduced to £40,000 and the Lifetime Allowance to £1,250,000.

TheTax Experts Product Range

Despite the threat of statements anticipating a crackdown on tax avoidance and the ‘activities of the rich’, on reviewing the tax avoidance measures that have been announced today none of them apply in any way to our tax solutions.

The document released to accompany the governments loudly announced increase of £77m “to fight tax avoidance” talks exclusively about hidden international assets, the black economy and the increased use of technology. Again this does not relate to any of the Tax Experts products.

Finally there was no mention of any changes to the GAAR or its introduction. In respect of the GAAR, it has been confirmed it will come into effect on or after Royal Assent to the Finance Bill 2013, which is likely to be July 2013.  It has been confirmed it will only apply to arrangements entered into after that date.  It will not operate retrospectively.

The latest version of the proposed GAAR (General Anti Avoidance Rules) rules and draft guidance will be reviewed to evaluate the effects on any transactions undertaken from summer 2013 onwards.  We will also be monitoring developments over the coming months and advising further.

The first component of this book investigates how Tax Havens can assist you and some of the caveats that enhance it like the tax laws in your country of residence and how that affects your tax position with respect to a particular tax haven. The book is primarily written for a British audience but will be appealing to all nationalities as 25 of the top tax havens in the world are addressed alongside the tax benefits of that particular jurisdiction and other useful information like how one occupies oneself with acquiring residency there, the cost of living and cost of homes in those locations.

The language used in the guide is simple and pitched at the layman. There is no escaping the use of technical terms when discussing taxation but this is made simpler to understand through the consistent use of simple examples.

The second section of the book checkouts how large corporations and the Rich use tax havens. The reader will learn in the second part the uses of off-shore companies, off shore trusts and off shore foundations in eliminating or reducing tax, protecting assets and maintaining anonymity. This information would have once cost you tens of thousands in consulting fees to access but is now compiled here for a small fraction of that cost. Large Corporations use a myriad of different corporate tax avoidance schemes and the more popular ones are covered here. Interestingly, you don’t need to be part of a multinational organization to use these methods.

Some of the “nuggets” of information contained within this book are how to avoid the “Big Four Taxes” of Income tax, Capital Gains Tax, Corporation Tax and Death tax, the identity of two sun soaked Mediterranean low tax jurisdictions that tax UK pensions at only 5 % and 15 % respectively, how to legally avoid the European Savings Tax Directive, how offshore companies can assist you in creating a successful tax free business, how foundations can preserve your privacy and much more. The Worlds Best Tax Havens can be purchased here.

This article will examine what Double Tax Treaties (DTTs) are and evaluate how they can be of great assistance in reducing or in some cases even eliminating tax. Double Tax Treaties are created to prevent double taxation as the name suggests. Double taxation would be a huge disincentive to business activities in a particular country if that business were to be taxed in both the country of residence and the country of source. However, these treaties open up a vast array of legislation that can be used in tax planning for tax avoidance and are used by the World’s best Tax Experts in devising tax plans.

Most UK DTTs follow the same OECD format but can be quite difficult to follow, however we will now look at some of the elements of UK DTTs and very briefly look at some of their uses.

Article I – Taxes Covered

This determines what actual taxes are covered in the treaty. For example the UK Cyprus treaty covers only income tax and corporation tax in the UK and just income tax in Cyprus. Usually Inheritance tax (IHT) is covered in separate treaties and is known as “Estate and Gift Tax”. These particular treaties determine where IHT will be charged, what exemptions there are and the rules for determining where the IHT will be charged.

Article IV – Residence

Article IV covers where you as an individual will be resident for tax purposes. This is important when you could fall into the residence of two or more countries based on their domestic rules. Article IV determines what are called the “tie breaker rules” to determine where you will be considered tax resident. For a British citizen who lives overseas, these treaties usually make the citizen exempt from UK tax apart from UK sourced tax. UK sourced taxes are often from property portfolios or UK businesses that were left behind after emigration. A UK business will usually incur corporation tax, but dividends will be tax free.

Tie Breaker Rules usually look at where your permanent home is and what determines your permanent home for determining tax residence. Another aspect covered is the “Centre of Vital Interests”, which looks at a person’s personal and economic ties to a particular country to determine tax residence. Habitual Abode is another test that is used when residency cannot be determined through the other 2 criteria already listed. An individual’s Habitual Abode is where that person spends most of his time. If a Habitual Abode exists for both countries, Nationality is then used to assess treaty residence based on the country of citizenship.

Article V – Permanent Establishment

This looks at the definition of a permanent establishment. This is crucial to international traders as it will dictate the extent to which overseas trading activities will be taxed in an overseas jurisdiction. This is a very important aspect for tax planning one’s business affairs and is used to great effect in significantly reducing tax on trading profits.

Article VI – Income from Real Property

Real Property is usually considered to be land and property. As already stated this is quite a common factor for UK citizens who moved abroad leaving a property portfolio behind. Most tax treaties give the right of taxation to the country of source – where the property is located. Tax credits are then issued to ensure that double taxation does not occur. In the UK, withholding tax is required to be taken by the managing agents on rent to ensure that tax is not lost, however an exemption can be gained in certain circumstances.

Article IX – Interest

This determines where tax on interest will be paid on foreign bank deposits. The tax treaties usually aim to reduce withholding tax or exempt tax in the country of source. In recent years this has made headlines with attempts at making tax on interest in Swiss bank accounts sent back to the European countries of the account holder. The manner in which this is now done, in order to still preserve anonymity is to send the withholding tax back, but not to say whom it came from. This would otherwise destroy or seriously impact on Swiss banking. The interest is not the main issue here but more so the origins of the lump sum that has incurred the interest in the first place.

Article XIII – Capital Gains

This article is of great interest to those who have emigrated abroad and then wish to sell property or share portfolios. This article usually has a “catch all” clause where the proceeds of these sales are taxed in the country of residence. This is except for land, which is usually taxed in the country where the land is located. British citizens who move abroad and then sell their portfolios will usually escape UK capital gains tax by being non-resident from the UK for 5 tax years after the sale. However tax treaties need to be examined to see if the person’s gains now fall under the tax regime in their new country of residence.

Article XIV – Independent Personal Services

This article looks at the taxation of income earned by self-employed people. If that person has a fixed base in another country, that country will usually be given the right to tax that income. For a person that has emigrated from the UK but still works in the UK for 90 days or less per year, he or she will be taxed in their country of residence. If the person were to work for more than 90 days a year in the UK, that person would then be considered tax resident in the UK and be liable for UK tax. Where this gets interesting would be if that person was resident in a tax haven like the Isle of Man his tax would be significantly less than if he were resident in the UK. If he were resident in Andorra, his income tax would be zero.

Article XV – Dependent Personal Services

Article XV covers taxation of employed income. This becomes important when someone may be working in the UK but employed by a foreign company or a UK citizen working in a foreign country but employed by a British company. If an employee is not present in the UK for more than 183 days in a given tax year, the income will only be taxable in the employee’s country of residence.

Article XXIV – Elimination of Double Taxation

This allows what is already incorporated into UK tax law: the foreign tax credit. This article is a “catch all” to prevent double taxation with respect to income that is not addressed above.

Article XXVII – Exchange of Information

Exchange of information is an agreement between tax authorities to prevent tax evasion.  There has been a lot of discussion about this in recent years as many tax havens are now required to exchange information with the HMRC in the UK. This however is not a catastrophe as it only affects those individuals who have been participating in illegal tax evasion, as opposed to those who have utilised intelligent and legal tax planning.

As can be seen above, DTTs cover a plethora of subjects and their interpretation is best left to professional tax experts. However a good working knowledge of which tax havens can offer what particular tax advantages is useful to you when considering using international tax planning to reduce or eliminate your tax bill. With this in mind an excellent book, The World’s Best Tax Havens by Lee Hadnum is a simple to read but highly informative book on the subject. Professional assistance cannot be emphasised more in creating international tax plans as there is no sense in escaping UK tax law, only to fall under the unfavourable tax law of another cou

The GAAR is designed to close the gap between “aggressive tax planning” and what might be termed “acceptable” day to day tax planning. The response is what one would expect from the Government in light of recent news regarding legal tax avoidance originating with the Jimmy Carr affair, but the reality is not quite so simple. The current Government is one that traditionally supports business people with the aim of improving the economy and thereby improving the lives of everyone else. However, they must also be seen to be supporting the average person who to some degree buys into the belief that wealthy people/employers have made their money “off the backs of the poor”. For this reason some statements are made and actions are taken to placate the masses. Those that are potentially affected by the GAAR already know that the tax system in the UK is already unfair because the more you earn, proportionally the more you pay (40% tax bracket, 50% tax bracket, NI etc) The GAAR would seem to be the result of this placation.

In line with this was some recent moves to block particular methods of tax planning – even though this happens every March/April with the Budget announcement and every Nov/Dec with the Pre-Budget announcement – the GAAR is a high profile action to be seen to be tackling the “problem” of  legal tax avoidance. The GAAR is now being rushed through in record time to placate these same people and …………gain re-election. Now lets look at what the GAAR means and what is its’ intention.

A GAAR form of legislation is presently used in Norway, Canada, Australia and even New Zealand. Does this legislation work? In New Zealand at least, they are looking at revoking their GAAR legislation because it is believed to hamper normal business and thereby harming the economy. As already mentioned the the aim is ideally to eliminate all forms of aggressive tax avoidance. The Government appointed one of the country’s leading authorities on UK taxation to look at the issue and to report back. His findings have been that there are not just “50 shades of Grey”, there are more like Five Thousand shades of grey, making this an almost impossible task in his own words. The Government has also only allowed a relatively short time to study the situation, make recommendations and the actually pass the legislation through parliament so it is believed that the inital goal of March 2013 will probably not be met.

What does this mean? Well, the task is described as “almost impossible” by the leading UK Tax expert, the time is too short to give justice to the legislation so it is likely that the GAAR will come out later in 2013 and not affect too much planning. However, most leading tax planning companies are now designing their methods and tax schemes in such a way that they will undoubtably not be affected by any likely GAAR legislation. This is likely as the Government does not wish to damage the economy and at the same time it wishes to be re-elected.

This article will examine what Double Tax Treaties (DTTs) are and evaluate how they can be of great assistance in reducing or in some cases even eliminating tax. Double Tax Treaties are created to prevent double taxation as the name suggests. Double taxation would be a huge disincentive to business activities in a particular country if that business were to be taxed in both the country of residence and the country of source. However, these treaties open up a vast array of legislation that can be used in tax planning for tax avoidance and are used by the World’s best Tax Experts in devising tax plans.

Most UK DTTs follow the same OECD format but can be quite difficult to follow, however we will now look at some of the elements of UK DTTs and very briefly look at some of their uses.

Article I – Taxes Covered

This determines what actual taxes are covered in the treaty. For example the UK Cyprus treaty covers only income tax and corporation tax in the UK and just income tax in Cyprus. Usually Inheritance tax (IHT) is covered in separate treaties and is known as “Estate and Gift Tax”. These particular treaties determine where IHT will be charged, what exemptions there are and the rules for determining where the IHT will be charged.

Article IV – Residence

Article IV covers where you as an individual will be resident for tax purposes. This is important when you could fall into the residence of two or more countries based on their domestic rules. Article IV determines what are called the “tie breaker rules” to determine where you will be considered tax resident. For a British citizen who lives overseas, these treaties usually make the citizen exempt from UK tax apart from UK sourced tax. UK sourced taxes are often from property portfolios or UK businesses that were left behind after emigration. A UK business will usually incur corporation tax, but dividends will be tax free.

Tie Breaker Rules usually look at where your permanent home is and what determines your permanent home for determining tax residence. Another aspect covered is the “Centre of Vital Interests”, which looks at a person’s personal and economic ties to a particular country to determine tax residence. Habitual Abode is another test that is used when residency cannot be determined through the other 2 criteria already listed. An individual’s Habitual Abode is where that person spends most of his time. If a Habitual Abode exists for both countries, Nationality is then used to assess treaty residence based on the country of citizenship.

Article V – Permanent Establishment

This looks at the definition of a permanent establishment. This is crucial to international traders as it will dictate the extent to which overseas trading activities will be taxed in an overseas jurisdiction. This is a very important aspect for tax planning one’s business affairs and is used to great effect in significantly reducing tax on trading profits.

Article VI – Income from Real Property

Real Property is usually considered to be land and property. As already stated this is quite a common factor for UK citizens who moved abroad leaving a property portfolio behind. Most tax treaties give the right of taxation to the country of source – where the property is located. Tax credits are then issued to ensure that double taxation does not occur. In the UK, withholding tax is required to be taken by the managing agents on rent to ensure that tax is not lost, however an exemption can be gained in certain circumstances.

Article IX – Interest

This determines where tax on interest will be paid on foreign bank deposits. The tax treaties usually aim to reduce withholding tax or exempt tax in the country of source. In recent years this has made headlines with attempts at making tax on interest in Swiss bank accounts sent back to the European countries of the account holder. The manner in which this is now done, in order to still preserve anonymity is to send the withholding tax back, but not to say whom it came from. This would otherwise destroy or seriously impact on Swiss banking. The interest is not the main issue here but more so the origins of the lump sum that has incurred the interest in the first place.

Article XIII – Capital Gains

This article is of great interest to those who have emigrated abroad and then wish to sell property or share portfolios. This article usually has a “catch all” clause where the proceeds of these sales are taxed in the country of residence. This is except for land, which is usually taxed in the country where the land is located. British citizens who move abroad and then sell their portfolios will usually escape UK capital gains tax by being non-resident from the UK for 5 tax years after the sale. However tax treaties need to be examined to see if the person’s gains now fall under the tax regime in their new country of residence.

Article XIV – Independent Personal Services

This article looks at the taxation of income earned by self-employed people. If that person has a fixed base in another country, that country will usually be given the right to tax that income. For a person that has emigrated from the UK but still works in the UK for 90 days or less per year, he or she will be taxed in their country of residence. If the person were to work for more than 90 days a year in the UK, that person would then be considered tax resident in the UK and be liable for UK tax. Where this gets interesting would be if that person was resident in a tax haven like the Isle of Man his tax would be significantly less than if he were resident in the UK. If he were resident in Andorra, his income tax would be zero.

Article XV – Dependent Personal Services

Article XV covers taxation of employed income. This becomes important when someone may be working in the UK but employed by a foreign company or a UK citizen working in a foreign country but employed by a British company. If an employee is not present in the UK for more than 183 days in a given tax year, the income will only be taxable in the employee’s country of residence.

Article XXIV – Elimination of Double Taxation

This allows what is already incorporated into UK tax law: the foreign tax credit. This article is a “catch all” to prevent double taxation with respect to income that is not addressed above.

Article XXVII – Exchange of Information

Exchange of information is an agreement between tax authorities to prevent tax evasion.  There has been a lot of discussion about this in recent years as many tax havens are now required to exchange information with the HMRC in the UK. This however is not a catastrophe as it only affects those individuals who have been participating in illegal tax evasion, as opposed to those who have utilised intelligent and legal tax planning.

As can be seen above, DTTs cover a plethora of subjects and their interpretation is best left to professional tax experts. However a good working knowledge of which tax havens can offer what particular tax advantages is useful to you when considering using international tax planning to reduce or eliminate your tax bill. With this in mind an excellent book, The World’s Best Tax Havens by Lee Hadnum is a simple to read but highly informative book on the subject. Professional assistance cannot be emphasised more in creating international tax plans as there is no sense in escaping UK tax law, only to fall under the unfavourable tax law of a

We are very happy with this series of books written for the British Tax Payer because they are thorough and explain the very technical subject of UK Taxation in Layman’s terms. The excellent use of examples clarifies even the most challenging themes and jargon. Each book out of series is updated annually in April after the annual UK Government Budget announcement, making them entirely accurate to date reading. This particular book investigates how those people in the UK who are classified as Non-Domiciled for tax purposes can use their unique status to reduce their tax bills by many thousands of pounds. The main essence of tax efficiency for Non-doms is that any overseas income is not taxed in the UK until it is remitted back to the UK. The author of this particular article is classified as Non-Domiciled for tax purposes in the UK and found the book extremely helpful in planning his own individual tax strategy.

Naturally the first piece of the book writes about explaining who genuinely qualifies as a Non-domicile for tax purposes in the UK. This is a complex subject and the explanation is adequate for the majority of readers. For most it is quite well defined but for a minority it is not so simple to define. The book even checkouts when it may be advantageous to claim UK domicile besides a foreign one, which may be very useful to some tax payers. Hadnum then goes on to explain the tax benefits of being classified as Non-domiciled in the UK for tax purposes. Basically there are many, which the average person can tap into and use to his or her advantage. For example the use of trusts for the purpose of saving tax is extremely difficult these days due to UK anti-Avoidance legislation but it can still make a lot of sense for Non-doms to use Trusts within this manner. Hadnum has written another guide for the use of tax havens when using Trusts in order to save on tax, The World’s Best Tax Havens.

In recent years there have been a number of changes to the tax rules in the UK and many specifically affect Non-domiciles valuable status. Hadnum explains these changes and show cases how they may affect you. Once again this is sometimes a complex subject but is made uncomplicated reading by the author. One of significant changes to the Non-domicile tax rules has been the introduction of the £30,000 tax charge for Non-doms who have inhabited the UK for more than 7 tax years. This is explained in depth and it is clearly explained when it may make more sense to just remit the income back to the UK and pay the tax on it as you would for any UK originating income.

In case you’re already aware of the benefits of your UK Non-domicile and have been happily using this status to save on significant amounts of tax, then it’s intelligent to know whether the tax “loophole” you’ve been exploiting, still exists. The author explores this topic and sadly there have been many useful loopholes removed from the ‘anti tax arsenal’ of Non-doms in recent years. Non-domiciles need to become informed of these changes. The changes require specific changes in tactics to ensure that un-taxed overseas profits from previous tax years remain un-taxed. The use of gifts to avoid tax is evaluated in some detail and perchance can be a profitable way of remitting un-taxed foreign income to the UK. Becoming non-resident for tax purposes as well as your Non-domicile status is a very useful tactic for those in a position to do so. This is covered admirably in one chapter and may be a huge aid in bringing foreign income to the UK, tax free. Non-residency is a whole subject by itself and Hadnum has an additional guide Non-Resident and Offshore Tax Planning to assist those resident in the UK in taking this step to save tax. Non-residency is an excellent tactic available to all tax payers, not just Non-doms. There are traps and pitfalls with going non-resident, which not all those who take this route will appreciate and these are all covered in simplistic detail in the additional tax guide.

There are those Non-domiciles who may be UK residents but may begin working abroad and this is covered in a separate chapter of the guide. Hand in hand with this, the situation of having foreign bank deposits and how to avoid tax on interest is covered in some detail.

This book will also show you how you can structure a 100 % tax free foreign investment portfolio, which means that the gains will grow at a faster rate than they would compound in a taxed environment, meaning you reaching your financial goals earlier. You will be shown how you can have a tax free holiday residence in the sun and there is a very good example of how a couple with £200,000 invested abroad in property, shares and cash can avoid all UK tax. The use of off-shore bonds to eliminate tax and have your investments grow in a tax free environment is also covered. Another important point is what information you do need to disclose to the UK tax man but also, what information you don’t need to disclose to the tax man is covered. Then as already mentioned the use of offshore companies and trusts are permitted to be used to legally avoid tax. This particular subject is covered in far more detail in Hadnum’s tax guide, The World’s Best Tax Havens

Have you ever wondered what is Tax planning about? Have you ever thought that you could benefit from Tax Planning or legal UK Tax Avoidance?

Many people suspect that the rich pay little or no tax whatsoever. Well, we are here to confirm that. In fact one of the reasons these people are rich is that they have managed to legally reduce their taxes over the years in order that their wealth can grow a lot faster than those automatically paying maximum levels of tax. However, it is no longer a “Secret Domain” and the methods and structures employed by the rich are now available to you also.

What is Tax Planning? Tax Planning is the legal structuring of your finances in such a way as to exploit existing legislation and loopholes to best effect – paying as little tax or even no tax whatsoever. This is essentially legal Tax Avoidance, which is not to be confused with Tax Evasion. Tax Evasion will land the participants in jail! Tax evasion is the illegal concealment of income or profits to avoid paying tax on it. As the reader will see there are easier and less risky methods of achieving the same result. How big is the Tax Planning Industry? The UK Inland Revenue estimated that in the region of £10 Billion was being sheltered from Taxation using legal methods of Tax Planning. However, the Industry estimated that this figure is more like a massive £100 Billion per year! Naturally the majority of this is due to large corporations but the rest, is a result of people like you!

Previously legal Tax Planning was the domain of the super rich and not available to anyone without an exceptionally large income and net worth. However, some Tax Planning companies have lowered the entrance levels in terms of income and net worth, making this service available to perhaps one person in 100 instead of one in ten thousand like before. You can get the same Tax Planning methods and structures if you were to visit the Big Five accountancy firms like Deloitte and Touche, KPMG, Ernst and Young etc but the entry levels mean it is beyond even those who are comfortably wealthy. You will also find that the fees charged by the Big Five are also sometimes ten times as much as those charged by the some of the smaller tax planning consultancies.

How can it work? Well the partners of these Tax Planning companies have generally the very best Accounting and Legal minds in the country working on their behalf to find ways of reducing or even totally eliminating your tax bill. Once these teams feel that they have a workable Tax Scheme, they put it to very senior Legal Counsels in London to see if what they have proposed is firstly legal and secondly, works. Once two favourable legal counsels’ opinions have been obtained the scheme is then put in front of the Inland Revenue for vetting. Since 2004 all Tax avoidance methods must be disclosed to the Inland Revenue within 5 days of offering the scheme to the public. This is known as DOTAS (Disclosure of Tax Avoidance Schemes). It is a criminal offence not to do so. The Inland Revenue will then question the legality and functionality of a scheme and once satisfied will give the scheme an ID number, which in turn is then added to the tax return of the clients entering into the scheme and enables the Revenue to gauge how much a particular scheme is being exploited. If the Inland Revenue deem it worth their while because excessive taxable revenue is being lost through a particular scheme, they will then decide to close the taxation loophole, which allows this. Typically moment when the taxation legislation is changed is during the annual Budget, which is announced in March/April yearly and also at the Pre-Budget Report, which is released in late October yearly. The scheme is then offered to the public through introducers who are usually accountants, solicitors and IFA’s (Independent Financial Advisors).

What guarantees do the clients have that a scheme works they will not be prosecuted for Tax Evasion? Firstly the fact that Legal Counsel has been sought means that a client can never be prosecuted for tax evasion. What guarantees do they have that it will work? Well, all providers of these methods to the Tax Planning companies guarantee that if clients are ever investigated by the Inland Revenue for some of the Tax Planning, which they have designed for a client, they will support the client up to and including the High Court stage with their own money. As you can probably guess, representing a client as far as the High Court Level is a very expensive activity and would probably cost in excess of the fees, which the average client has paid. Therefore the providers of tax planning will never do Tax Planning for a client unless they are certain that it will work.

What is most adverse thing that can happen to a client who participates in Tax Planning? The tax scheme could be “cracked” by the Inland Revenue, making the client liable for the tax due and interest. Clients will never be prosecuted for this in any way. The downside is obviously the fact that a client has paid fees, which can range from 10 % to 25 % of the income being sheltered. Some clients deem this “worst case” scenario as being just a high interest loan from the Inland Revenue because time it has reached a client paying their tax (perhaps severl years), they have ideally turned that money into a significantly larger sum, which they may not have otherwise been able to do had they paid the initial tax on it. Needless to say this is not a common scenario but it does occur. This is why potential participants in tax planning should vet the companies they intend to choose beforehand.

How do Tax Planning companies operate? Typically tax consultancies will not market their own services but those of an accountancy firm, law firm or even an insurance company whom are the creators of the various schemes. Most introductions are made by personal referral to an existing client base and an initial screening is done over the telephone or vai a questionnaire. Once their need has been established it is standard practice for a FREE and no obligation consultation being arranged where the client can see first hand how their taxation issue will be managed. Clients will often take their own accountants to such a meeting and some will consult their accountants afterwards once they have the technical notes for the scheme and the Legal Counsel’s opinion.

How do Tax Consultancies get paid? For the introduction of a client to the right accountancy source, which they will not be able to source themselves, The Tax Planning companies charge a small fee based on a percentage of the income being sheltered based on the method being used. Some are also given referral fees by the providers of the various schemes. Of course there is usually no fee for just perusing what is available, however some will charge one to keep away clients “fishing” information and attempting their own solutions to their taxation issues.

At the moment of writing this article most Tax Planning companies are in such a position to offer clients ways of eliminating every tax there is apart from VAT and Council Tax! As a sample clients can expect to reduce or in some circumstances even eliminate Income Tax, in some cases clients are in a position to claim abck all the tax paid for the last three tax years, avoid/eliminate Capital Gains Tax, avoid/eliminate Death duty, reduce corporation tax by 50 %, eliminate Stamp Duty, withdraw tax free cash from pension funds to be used today and not when clients retire, contractor schemes to avoid IR35, create asset holding structures to hold investments in a tax-free environment for Inheritance tax and capital gains tax purposes. This is just a small sample of what can be sourced for clients.

As already stated, the Inland Revenue at each budget seeks to close these services down. This means that some methods of tax savings might only have a life-span of six months. Therefore delaying or deliberating too long may mean losing out on a “Golden Opportunity”.

Once clients have done this and explored this industry, they see that tax is truly optional.