Last week – 21st May 2013 – Accountancy Age reported that Apple had achieved the impossible, they had 3 subsidiaries that were not tax resident any where on earth!
While the US Senate committee held Apple is “one of the US’s biggest tax avoiders”, it noted the business had not done anything illegal.
In the committee’s report, chair Carl Levin said Apple was using “gimmicks” to avoid tax.
“Apple wasn’t satisfied with shifting its profits to a low-tax offshore tax haven,” he said. “Apple sought the Holy Grail of tax avoidance. It has created offshore entities holding tens of billions of dollars, while claiming to be tax resident nowhere.
But its not just Apple as reported by the Guardian on Friday 24th May 2013
Apple is the latest company under the spot light for organised tax avoidance. In common with Starbucks, Google, Amazon, eBay, Microsoft and others it routes transactions through low or no tax jurisdictions to reduce its tax bill. Indignant ministers gnash their teeth and the corporate merry-go-round continues.
Basically Unitary Taxation treats a Business as a single unified Business rather than a collection of entities, it then apportions overall global profit to countries based on genuine economic activity, each country sees the report and then charges tax accordingly. It sounds like the perfect solution to me.
The Tax Justice Network have written a report ‘Towards Unitary Taxation of Transnational Corporations‘ (9 December 2012) it explains how Unitary Taxation could work and how it might solve the current tax avoidance problems.
On the 15th May HMRC issued a consultation document ‘National Insurance and Self-employed Entertainers‘ comments are invited until 6th August 2013. The object of the consultation is to simplify National Insurance for Entertainers and for the recommendations to be rolled out from 6th April 2014.
The consultation is relevant to:
Actors
Singers
Musicians
Performers
Its not relevant to individual employed under a ‘contract of service’ as they are employed.
Since 1998 self employed entertainers have been deemed to be employed earners for National Insurance purposes in order that they could access earnings related contributory benefits. This requires contributions from the entertainer and secondary contributions from the producer of the entertainment.
But its complicated because entertainers often receive ‘additional use payments’ such as royalties, the payments can be complex and paid years after the original engagement.
In addition there is evidence that the 13.8% employers NI has made some producers look outside of the UK for entertainers.
Some amendments to the rules were made in 2003 replacing the ‘wholly or mainly by way of salary’ with a revised definition of ‘salary’
“Salary“means payments:
(a) made for services rendered;
(b) paid under a contract for services;
(c) where there is more than one payment, payable at a specific period or interval;
and
(d) computed by reference to the amount of time for which work has been performed.
But this hasn’t help, computed by reference to time is too broad and entertainers don’t work on this basis.
So far HMRC have sought the views of groups representing 80,000 entertainers and 23,000 engagers.
Currently there are two options within the Class 1 regime for amending legislation which HMRC believe would simplify the NICs treatment of entertainers’ earnings:
Option 1: Provide for separate secondary contributors for NICs due on Initial Performance Payments (IPPs) and NICs due on Additional Use Payments (AUPs);
or
Option 2: Provide that IPPs are subject to Class 1 NICs, but AUPs are subject to Class 4 NICs
Alternatively all of the entertainers earnings could be moved into class 2 and class 4 NI.
There is no doubting the resolve of HMRC to track down and prosecute tax evaders.
The Government has committed to spend £917m to tackle tax evasion and raise an additional £7bn each year by 2014/15.
HMRC are using 2,500 staff to tackle avoidance, evasion and fraud, there is also a website to help those who want to declare income https://www.gov.uk/sortmytax
In the search for tax evaders, HMRC have a £45m computer system called Connect which in 2011 delivered £1.4bn in tax revenue and the system is getting bigger and better all the time. According to Accounting Web:
It uses a mathematical technique to search previously unrelated information and detect otherwise invisible ‘relationship’ networks. Using Connect, HMRC sifts through information on property transactions at the Land Registry, company ownerships, loans, bank accounts, employment history, voting and local authority rates registers and compares with self-assessment records to spot taxpayers who might be under-declaring or not declaring income.
Last year Connect made links between tax records and third party data from hospitals, pharmaceutical companies, insurers and even gas SAFE registrations. DVLA records and the shipping and Civil Aviation Authority registers help identify owners of cars and planes who declare income that the computer suggests cannot support such purchases.
In addition HMRC have also identified 200 accountants, lawyers and professionals who advise on tax avoidance structures and its currently unclear how HMRC will be dealing with them and their clients.
It is important to remember that most people pay the correct tax, in fact HMRC calculate that 93% of tax due is paid correctly, its only a small minority who try to evade tax.
House prices are rising as confirmed by the Land Registry in their report 29 April 2013, the annual change is 0.9%, rent is increasing again after a drop in 2009 according to the English Housing Survey, in 2011 it went up 3% to a mean rent after housing benefit of £132 per week. So let’s see who the tenants are (English Housing Survey 2011):
social and private renting households receiving Housing Benefit
Lending rates are low with Bank of England base rate stuck at 0.5%.
So we should see Buy to Let coming back into fashion with investors, with that in mind here are my top tips to minimise your tax:
1. Claim allowable expenses
Mortgage or Loan Interest (but not capital)
Repairs and maintenance (but not improvements)
Decorating
Gardening
Cleaning
Travel costs to and from your properties for lettings or meetings
Advertising costs
Agents fees
Buildings and contents insurance
Ground Rent
Accountants Fees
Rent insurance (if you claim the income will need to be declared)
Legal fees relating to eviction
2. If the property is furnished claim for Wear & Tear, you can claim 10% of the rent each year
3. Claim for repair and advertising expenses incurred in getting the property ready for renting
4. Consider how the property is owned for example your partner may pay less tax or if you own it 50/50 you could use their capital gains tax exemption on sale of the property
5. Consider whether owning the property within a limited company might be better, Corporation Tax is 20% for small companies in the UK which can make dividends more tax efficient than personal income.
6. Make sure any borrowings you have are on the Buy to Let so that you can claim tax relief on the interest
The Pension Service will help you track down any lost pensions, if you’re not retired you might be able to consolidate all your pensions to get a better return.
Assets are considered dormant when contact with the owner is lost – typically due to a name change after marriage or divorce, an unreported change of address or expired postal forwarding order, and incomplete or illegible records.
It’s important to note millions of family members remain unaware they’re entitled to collect unclaimed assets owed deceased relatives, who passed on without leaving updated financial records for their heirs.
The majority of this lost money comes from dormant bank accounts, orphan pensions, unknown windfalls, missing shares and abandoned dividends, forgotten life insurance policies, National Savings Certificates and Premium Bonds which have not been redeemed; but also included is £300 million in unclaimed National Lottery winnings!
If you think you may have lost touch with your account or savings, this website will guide you through some simple steps to help reunite you with your money. This is a FREE service and is brought to you by the British Bankers’ Association, the Building Societies Association and National Savings and Investments.
If you have a pension fund you could be targeted by companies offering you ways to access your pension fund before you are 55, this is known as ‘Pension Liberation’.
Typically, pension liberation arrangements involve transferring your pension savings from your existing pension scheme to another pension scheme to allow you to access funds early. The schemes are offered through companies, who make money by charging you a fee to do this or by taking money direct from your savings. Company representatives or advisers may be pushy and may say they can offer you a loan or advance or cashback from your pension. They may even offer to share their commission for doing this.
Sometimes representatives suggest that because of the excellent returns their new scheme supposedly offers, you’ll get an upfront reward or dividend. Whatever way it’s presented, if you end up getting cash you’re likely to be involved in pension liberation.
Converting a pension pot into cash can sound very attractive to people who urgently need money. However, don’t be tempted, as there are big tax consequences of accessing your pension early. If something sounds too good to be true, it usually is.
Very often the advisers say there is a legal loophole to get round the rules to give you money by transferring your pension pot to a different scheme. There is no legal loophole. Very few people can take money out of their pensions before they’re 55. If you can, it’s usually because you’re retiring on ill-health grounds such as a terminal illness and you must meet strict rules to do this.
If you liberate your Pension you personally will have to pay tax at a special fixed rate of 55% on the funds liberated. The 55% rate isn’t reduced if you are a lower rate tax payer or pay no tax at all.
In addition to the tax the Pension Advisory Service say that on average you will be asked to pay a fee of at least 20% by the company liberating your pension.
When a company becomes insolvent there can be serious consequences:
An increased risk of personal claims and Directors disqualification
Winding up petitions
Disposal of assets will be void once a winding up petition has been made
Banks and Lenders will enforce their security
Termination of contracts with customers and suppliers
Transactions entered into within the previous 2 years can be reviewed and reversed
There are two tests for corporate insolvency:
the cash-flow test: is the company currently, or will it in the future, be unable to pay its debts as and when they fall due for payment?
the balance sheet test: is the value of the company’s assets less than the amount of its liabilities, taking into account as-yet uncertain and future liabilities?
Lord Walker acknowledged the uncertainty that is inherent in the (Balance Sheet) test, commenting that: “it is still very far from an exact test, and the burden of proof must be on the party which asserts balance-sheet insolvency.” It will, therefore, not simply be a matter of looking at a company’s statutory balance sheet at a given moment in time as there may be relevant assets and liabilities not contained in that document. However, nor will it involve a rather more complex assessment of whether the debtor has reached the point of no return.
It is of course true that a snapshot of a company’s balance sheet is not conclusive as to its commercial and economic viability, and to make every company in this position vulnerable to a winding-up or administration order would be unfair and uncommercial.
The Supreme Court’s decision should therefore be welcomed for clarifying that the two tests are mutually exclusive and both represent different ways of analysing whether a company is insolvent. The judgment does leave some issues unresolved, for example the correct methodology for discounting future liabilities and the timing of the accrual of future and contingent liabilities.
There is a common mis-conception that if you give something away it doesn’t have any tax implications, unfortunately, that isn’t the case.
When you give away shares you usually work out your gain or loss as if you’ve sold the shares at market value. The market value is the price you would expect to receive if you sold them on the open market. This also applies if you sell them for less than their full value.
There are some exceptions:
if you can claim Gift Hold-Over Relief
if you give the shares to your husband, wife or civil partner
if you give shares to a registered charity
To qualify for Gift Hold-Over Relief, the shares must be in a trading company, or the holding company of a trading group, and one of the following must apply:
the shares aren’t listed on a recognised stock exchange
you’ve at least 5 per cent of the voting rights in the company
You don’t pay Capital Gains Tax when you give (or otherwise dispose of) shares, to your husband, wife or civil partner, providing both of the following apply:
you’ve lived together for any part of the tax year in which you made the gift
the gift isn’t ‘trading stock’ (trading goods bought for resale)
You won’t have to pay Capital Gains Tax on a gift of shares to a registered UK charity.
You can ask HMRC to check your market valuation by submitting Form CG34 it will take at least 2 months.
Settlements Legislation S624/S660
If you think moving shares in your company between yourself and your spouse sounds like a great way to save tax, think again!
Since the 1930’s we have had Settlements Legislation which prevents you from giving income or assets to someone else in your family in order to pay less tax.
Where the anti-avoidance Settlements legislation applies, all income transferred by a settlement is treated as that of the settlor.
I was watching BBC news this morning and saw Jordon Cox, 16, from Brentwood in Essex, he scours newspapers and magazines for coupons and vouchers that offer special deals on food and household products.He bought £105 of groceries for £1.62, follow this link to see his interview http://www.bbc.co.uk/news/uk-22418225
So lets start by learning the lingo
Bogo: Buy One Get One
Peelie: A coupon stuck to a product
Blinkie: A coupon station in a store
Stacking: Using a store coupon with a manufacturers coupon – not all stores allow this
Catalinas:Coupons printed at the cash register when you pay for your items
Rebate: Mailing a receipt to a company to get a refund
Overage: When the value of a coupon exceeds the purchase price of the item
Everyone loves a freebie or money off, but there seem to be so many sites offering vouchers its hard to keep track of what is on offer, for example I get e mailed deals from:
That’s before you start cutting coupons out of magazines.
Pitney Bowes have produced a white paper on Coupons – April 2013:
The whitepaper, entitled ‘The Coupon Renaissance’, revealed that 76% of consumers would buy more from local businesses if they offered coupon incentives. With many small local businesses struggling in today’s economic climate, the figures offer a positive outlook that SMEs should capitalise on.
The surge in coupon redemptions is a relatively new phenomenon; with the current economic climate increasing popularity, the UK has witnessed a sharp 14.7% spike in usage since 2008**. The research also showed that an impressive 80% of consumers have redeemed a coupon in the last year, and half (49%) of customers redeem them as frequently as one per month.
The trend by consumers to use coupons to cut costs are likely to increase based on a report from Which:
More than half of Britons cannot cope on their current salaries with one in five forced to borrow money to buy groceries and other household essentials because of the soaring cost of living, a new survey revealed today.
One in four people revealed they’ve had to use their savings to buy food or other daily essentials while one in five have gone into debt to do this.
Dividends are paid at the same rate for each category of share in accordance with the number of shareholdings held
CTA10/S1168(1) specifies that dividends are treated as paid for the purposes of the Corporation Tax Acts ‘on the date when they become due and payable’
Never be tempted to backdate board minutes and dividend vouchers, as the documents will be legally void and can constitute a criminal offence.
There are times when, for good reasons, a Shareholder may wish to waive their right to a dividend, but HMRC are well aware that often waiving a dividend can have tax implications (bounty and settlement) and they have the following advice in TSEM4225
Not all dividend waivers are vulnerable to challenge. Where a company with few shareholders declares a dividend when one or more of the shareholders has waived their right to a dividend in circumstances where other shareholders may benefit, it is possible the Settlements legislation could apply. You should look out for the following factors, which would indicate that the Settlements legislation is likely to apply.
The level of retained profits, including the retained profits of subsidiary companies, is insufficient to allow the same rate of dividend to be paid on all issued share capital.
Although there are sufficient retained profits to pay the same rate of dividend per share for the year in question, there has been a succession of waivers over several years where the total dividends payable in the absence of the waivers exceed accumulated realised profits.
There is any other evidence, which suggests that the same rate would not have been paid on all the issued shares in the absence of the waiver.
The non-waiving shareholders are persons whom the waiving shareholder can reasonably be regarded as wishing to benefit by the waiver.
The non-waiving shareholder would pay less tax on the dividend than the waiving shareholder.
So if you are thinking of waiving dividends, bare the following in mind:
A formal Deed of Waiver is required, the Deed will say that the Dividend is Irrevocably Waived, it must be dated before the right to dividend arises, it must be signed and witnessed and filed with the company statutory records
You should have a good commercial reason for the Waiver which could be to retain funds for a specific purpose and this could be stated in the Deed
Don’t make a habit of waiving dividends as it will increase the risk of questions from HMRC
Don’t give inducements to encourage Dividend Waivers
