British Virgin Islands Cayman Islands London Topical UK Tax Issues Marcus Parker STEP Cayman December 9 th 2014

2 What is the topical connection between Angelina and UK tax?

3 Tax information reporting – TIEAs, UK FATCA DOTAS – Disclosure of Tax Avoidance Schemes Ever changing tax legislation and closing “loopholes” HMRC aggressively litigating tax avoidance schemes (and often succeeding) Accelerated Payments Increased penalties and jail time Reputational issues – “morally wrong” and “very dodgy” Tough environment for tax evaders but also tax avoiders and tax planners?

4 New strict liability criminal offence of holding offshore accounts Disclosure opportunities LDF still available until 5 April 2016 but with increasing restrictions (but still a full amnesty from criminal investigation and a 10% fixed penalty and time restricted tax liability) Specific settlement opportunities (e.g. for EBTs until March 2015) Tough environment for tax evaders but also tax avoiders and tax planners?

5 3, 16, 21, 31, 40, 45, 46, 60, 90, 91, 120, 183! Statutory residence test since 6 April 2013 Relevant day count is not always 90! Complicated rules (105 pages of guidance) and easy to make mistakes TEST 1: Automatic non-UK residence TEST 2: Automatic UK residence Residence

6 TEST 3: sufficient ties: family accommodation work 90 day country (for leavers only) Exceptional circumstances Split year rules Residence

7 Residence – sufficient ties tables Days in the UKNumber of ties 46-90All Over Days in the UKNumber of ties Over Table A (leavers only) Table B

8 Domicile of origin – “tenacious”, “enduring”, “strong hold”, “need to sever bonds”, “adhesive” Domicile of dependence Domicile of choice – “clearly and unequivocally proved”, “need powerful and cogent facts” Deemed domicile – 17/20 years; 3 years from leaving UK Evidence – intensely fact based approach Burden of proof Domicile – general rules

9 Morris v Davies 2011 “demonstrates the tenacious nature of a domicile of origin” UK v Belgium Property Family Work Culture Cats! Domicile – some examples

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11 Sekhri v Ray 2013 “human tragedy” and “financial suicide” India v England v Singapore Wife – Indian domicile of origin – had to prove she had acquired an English domicile of choice Husband – wife had to prove he had, and retained, an English domicile of origin Domicile – some examples

12 In consultation: Non-residents to lose £10,000 personal allowance Since 6 April 2014: “split contracts” don’t work EBTs as a way to avoid PAYE and NICs – they don’t work Tax planning schemes failing New either immediately or from 6 April 2015: specific restrictions on “loss relief” where tax avoidance is a purpose Income tax

13 UK resident but not domiciled rules only Not applicable to non-UK residents but remember temporary non-resident rules Since 4 August 2014: changes to remittance of loans and offshore collateral NEW from 6 April 2015: Increase in remittance basis charge and a three year election only? 7/9 years still £30,000 12/14 years £50,000 now £60,000 17/20 years £90,000 Remittance rules

14 NEW From 6 April 2015: Non-UK residents will pay CGT on UK residential property gains (awaiting detailed rules) NEW From 6 April 2015: New PPR rules and restrictions (awaiting detailed rules) Since 6 April 2013: Enveloped property rules for non- natural persons - SDLT, ATED, CGT Increases in ATED and lowering of threshold to properties valued over £1 million from 6 April 2015 Remember temporary non-resident rules Capital Gains Tax

15 Since 20 March 2014 – 15% rate on properties over £500,000 if purchased by an offshore company – this rate continues SDLT – OLD rules Up to £125,000Nil Over £125,000 to £250,0001% Over £250,000 to £500,0003% Over £500,000 to £1 million4% Over £1 million to £2 million5% Over £2 million7%

16 Stamp duty land tax: reform of structure, rates and thresholds SDLT – NEW from 4 December 2014 Property value band Rate £0 - £125,0000% £125,000 – £250,000 2% £250,000 – £925,000 5% £925,000 – £1,500,000 10% £1,500, %

17 Stamp duty land tax: reform of structure, rates and threshold SDLT – NEW from 4 December 2014 Property purchase price New SDLTPrevious amount £1 million£43,740£40,000 £2 million£153,750£100,000 £5 million£513,750£350,000 £10 million£1,113, 750£700,000

18 Nil rate band still £325,000 Transferable bands Spouse exemption – not always unlimited Spouse domicile election Since 6 April 2013: restrictions on deducting debts for IHT purposes NEW from 6 April 2015: Specific amendments to combat unacceptable tax avoidance through the use of multiple trusts and simplified rules on calculating IHT on trusts Inheritance tax

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20 PROPOSED: Mansion Tax – “could put off a move to the UK”: Angelina Jolie Will increasing wealth based taxes lead to the wealthy moving out of, or stop investing in, the UK? Increased rates/reduced thresholds – remittance basis charge, ATED, tax rates? Continued HMRC crackdown on tax evasion, avoidance and planning More tax litigation Challenges to domicile status Increased access to information – nowhere to hide? Citizenship based tax? Other changes?

Questions Q

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