Update on Residence and Domicile

April 2008

The government will implement a package of reforms announced in the 2007 Pre-Budget Report subject to certain changes. The measures will take effect from 6 April 2008.

The main proposal is that UK residents who are non-domiciled or not ordinarily resident, who wish to continue to be taxed on a ‘remittance basis’ rather than on their worldwide income and gains, will have to pay an annual tax charge of £30,000 on unremitted income and gains. Those with unremitted foreign income and gains of less than £2,000 will however be exempt from this charge.

The charge will apply if an individual has been resident in the UK for at least seven out of the previous ten tax years. Individuals will be able to decide each tax year whether to pay the charge and be taxed on the remittance basis or be assessed on their worldwide income and gains.

Key changes include:

  • users of the remittance basis will lose their automatic entitlement to certain allowances, such as the personal allowance and the capital gains annual exemption (unless the £2,000 de minimis applies)
  • children will not pay the £30,000 charge
  • the £30,000 charge should be creditable against foreign tax
  • art works brought into the UK for public display or for repair and restoration will face no new tax charges
  • income and gains in offshore trusts will only be taxed when they are remitted to the UK, even if these come from UK assets
  • changes will be made to the current rules on remittances to restrict the ability of individuals to sidestep UK tax on income and gains where HMRC believe it is due.

In addition, from 6 April 2008, when determining if an individual is resident in the UK, any day where the individual is present in the UK at midnight will be counted as a day of presence in the UK for residence test purposes. There will be an exemption for passengers who are temporarily in the UK whilst in transit between two places outside the UK.

Please do get in touch if you want any further advice in this area.

Internet Link: HMRC residence and domicile guidance

Online Submission Of Employers Forms

April 2008

The employers annual returns P35 and P14 (P60) are due for submission to HMRC by 19 May 2008. There is a tax free incentive payment due of £100 for small employers, those with less than 50 employees, who successfully file their returns electronically.

The final date for payment of PAYE, national insurance contributions, construction industry scheme deductions and student loan deductions is 19 April 2008 (22 April 2008 for cleared receipt of electronic payments into HMRC’s bank account). The original guidance stated that the final date of payment was 18 April in error.

Internet Link: HMRC guidance and HMRC revised guidance

Implementation Date Change for Rights During Maternity Leave

April 2008

Following changes being made to the Sex Discrimination Act and, later this year, to the Maternity and Parental Leave Regulations, the law on contractual terms of employment during Additional Maternity Leave (AML) is due to change in respect of women whose babies are due on or after 5 October 2008. HMRC had previously advised that this change would be effective for babies due from 6 April 2008.

As detailed in the February 2008 Employers’ Bulletin:

‘The result of the legislative changes is likely to extend all the non-pay contractual terms and conditions of employment to which a woman is entitled during OML throughout her AML, including accrual of contractual annual leave. These rights would therefore apply to the full 52 weeks maternity leave entitlement as opposed to the first 26 weeks as now.’

Ordinary Maternity Leave (OML) is the first 26 weeks of maternity leave.

HMRC have advised that further details will be provided on the Department for Business Enterprise & Regulatory Reform (BERR) website and on HMRC’s website.

We will keep you informed of developments in this area but please do get in touch if you have any queries in the meantime.

Future is Looking Bright for Weatherer Bailey Bragg Client

April 2008

A Midlands animal nutrition specialist is looking forward to expansion into overseas markets following its successful takeover, completed with the help of Sutton Coldfield-based business advisors and accountants Weatherer Bailey Bragg LLP.

Premier Nutrition Products Limited, in Rugeley, Staffordshire, has become a leading manufacturer of vitamin and mineral premixes for livestock species and pets. Since the company was formed in 1991 it has grown its annual turnover to £30m. Earlier this month, the business was sold to AB Agri, part of international food group Associated British Foods, but will continue to operate as a stand-alone business, retaining all of its 83 staff.

Weatherer Bailey Bragg were brought on board as consultants to Premier Nutrition to advise on the takeover arrangements, including tax issues and complex financial assistance rules on share acquisitions.

Premier Nutrition finance director Tim Thacker had approached Weatherer Bailey Bragg partner Richard Miner having worked with him in the past on corporate finance transactions and felt he was ideally qualified to ensure that the transaction came to a satisfactory conclusion.

He said: “In this kind of situation, it is essential to work with someone with that kind of expertise and to know they are someone you also trust and respect. Weatherer Bailey Bragg’s specialist knowledge made the whole process much easier for us.”

Richard Miner said: “We are delighted to have helped Premier Nutrition through a transaction that opens up such exciting new opportunities for the company. It is also very pleasing to know that they recognised that they could find the expertise, experience and commercial skills they needed to deal with a number of complex issues virtually on their doorstep.”

With AB Agri already expanding in international markets including EU and non EU European countries, as well as Asia, Premier Nutrition is now looking forward to building its overseas business, with the potential to create new jobs.

‘Income Shifting’ Legislation Delayed

April 2008

The introduction of the proposed legislation on ‘income shifting’ has been delayed until April 2009.

You may well remember that HMRC proposed to legislate following their defeat in the Arctic Systems case. This involved a husband and wife who owned a company 50/50 and, broadly, took the profits out by way of dividends, again 50/50. HMRC attempted to tax the dividends solely on the husband, as he was performing most of the work which generated the profits of the company.

Following HMRC’s defeat in this case, the government published draft legislation to prevent a tax advantage being gained through ‘income shifting’. This legislation was expected to apply from 6 April 2008 to:

  • company distributions, usually dividends; and
  • profits from a partnership.

The proposed rules have been very widely drafted and would, in their current form, catch many owner-managed businesses involving husbands, wives and other family members, as well as businesses run by non-family members, leaving many with a substantially higher tax bill.

The government has reconsidered its position following a period of consultation and now believes that a further period of consultation will ensure that legislation in this area provides clarity and certainty for businesses and their advisers.

The government now intends to introduce legislation through Finance Bill 2009 and will not enact legislation effective from 6 April 2008.

We will, of course, keep you informed of developments. However, if you have any questions or concerns in the meantime, please do not hesitate to contact us.

Internet Link: Press notice