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Overseas Income/Gains

If you are resident in the UK and receive income or gains from overseas sources, it is important to consider whether it will be liable to UK tax, and if so, your compliance obligations.

In identifying your liability to UK tax, we will consider the impact of any Double Tax Treaties (if applicable) and the availability of any reliefs – particularly if the income or gains have already been subject to foreign tax.

If you are required to report and pay UK tax on your overseas income/gains, we can also assist in calculating the tax due and making all necessary submissions to HMRC.

Please note that we can only advise in respect of your UK tax liability, however we have connections with a number of non-UK tax advisors who can help you in relation to your tax liability in the overseas jurisdiction.

The Problem

Our client had undisclosed income and gains from a Swiss bank account and wanted to bring his tax affairs up to date whilst ensuring that the tax was calculated correctly and penalties minimised.

Our client was also concerned about the impact of the UK-Swiss tax treaty, under which he would have suffered a one levy of over £300,000 unless action was taken prior to 31 May 2013.

The Solution 

We provided advice and illustrative computations comparing the Swiss Tax Treaty with the Liechtenstein Disclosure Facility (LDF) and a voluntary disclosure to HMRC.

Following our clients decision to proceed with the LDF, we prepared detailed calculations of the UK tax liabilities, liaised with advisers in both Switzerland and Liechtenstein, provided a detailed analysis of the more complex areas of the disclosure and finally corresponded the disclosure to HMRC on our clients’ behalf.

The Result 

HMRC accepted our disclosure and the calculations of tax, interest and penalties without amendment.

We saved our client over £166,000 compared to the charge he would have suffered under the UK-Swiss Tax Treaty.

Specific benefits of making the disclosure through the LDF included:

  • Reduced rate of penalties as compared to a voluntary disclosure or unprompted HMRC enquiry/investigation
  • Guarantee of no criminal prosecution
  • Past tax liabilities brought up to date giving relief to our client and preventing an enquiry by HMRC

The Problem

Our client’s father established a foundation under the laws of a foreign country over a decade ago. The father was non-UK domiciled and had never lived in the UK.

The only assets held by the foundation were cash and investments which were managed by an overseas bank.

On the death of their father, our client (a UK tax resident) obtained an interest in the foundation, however our client was unsure what this would mean from a UK tax perspective.  In particular, our client was concerned that the foundation would be treated as a discretionary trust which would give rise to large tax liabilities.

Some months after the father’s death it was agreed that the foundation would be wound up by selling the assets investments and distributing the cash.

Our client therefore required assistance to understand the tax implications of her interest in the foundation and the proposed distribution, as well as compliance with UK self-assessment tax returns.

The Solution

The first step was to consider the tax treatment of the foundation from a UK perspective.

This is a tricky area because whereas foundations are often used in civil law jurisdictions, in common law jurisdictions such as the UK we tend to use trusts. Trusts and foundations may have some similarities, however there are a number of distinct differences which will vary depending on the country in question and the terms of the specific foundation.

After a detailed review of the deed and arrangements we determined that our client became absolutely entitled to the income and capital of the foundation immediately following the father’s death, and the foundation was in effect equivalent to a bare trust under English law.

This meant that our client was responsible for income tax and capital gains tax on the income/gains arising since the father’s death, and that there were no tax consequences in relation to the distribution of cash as this simply aligned the legal and beneficial ownership position.

The second step was to report the income/gains arising from the investments on our client’s self-assessment tax returns.  As part of this work, we considered our client’s UK tax liability on the receipt of overseas interest, dividends, gains from foreign exchange (FOREX) contracts and reporting/non-reporting funds.

The Result

Our client could rest assured in the knowledge that their tax return had been submitted and their UK tax affairs were in order.

 

 

Testimonial provided by Mr T in September 2013

The review that you initially provided of my situation allowed me to understand that it was probably going to be better to make a disclosure under the Liechtenstein Disclosure Facility (LDF) rather than suffer the UK-Swiss Tax Treaty one off levy. This certainly proved to be the case.

Your thorough and robust approach to the calculations and their presentation allowed me to make my disclosure in a confident manner and I was very pleased that HMRC did not enquire into the disclosure.

In general, I was delighted with the service and results delivered by Vikki and yourself.

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