Features
HMRC Tax Return Enquiries
The majority of individuals who file annual Self Assessment Tax Returns are likely at some stage to be subject to an in-depth enquiry into Tax Return entries. This is a fact and whereas such enquiries should not be an annual event, some individuals may be selected more than once!
To date only a small percentage of our clients have been selected for enquiry. Previously, we have merely absorbed the additional costs for time spent on such work without extra charges. However, due to the increased number of cases being selected, with Britons working abroad a popular choice, we are unable to continue with this practice.
The time spent in settling enquiries now far exceeds the time covered by our fixed annual fee. Due to this we must now charge for the extra work/time carried out on such enquiries. Typically, this amounts to approximately 5 hours (@ £50 per hour) into 1 Tax Return.
When replying to our April 2010 end of year request for information letter please indicate whether you wish to take advantage of the Voluntary Enquiry Protection Fee (for 2009/10). If so, please add £50 (+ VAT where applicable) to our invoice. This option is only available before HMRC initiates an enquiry.
Unless the voluntary Enquiry Protection Fee option is taken up, the hourly charge will apply to all enquiry work. Unfortunately the voluntary Enquiry Protection Fee option is not available to clients in Seafaring employment.
Non Residence
With effect from 06/04/08, the date of arrival into the UK will count as a day in the UK for averaging purposes, provided you are in the UK at midnight on that day.
Seafarer’s Earnings Deduction
A Seafarer is “someone who performs their employment duties on a ship”. Offshore installations, used in the oil and gas industry, are not ships and workers on mobile offshore drilling units, semi-submersibles and jack-up rigs are not “seafarers” and are not entitled to the deduction.
Seafarers – 100% SED Claims
As a result of the Commissioner’s decision in the Pride South America case, HMRC’s interpretation of what constitutes an offshore installation has changed. As a consequence, the majority of vessels involved in Oil and Gas exploration/exploitation are no longer considered to be ships for the purpose of claiming 100% SED.
HMRC has stated that all claims to 100% SED will now be subject to a thorough review which will lead to many more enquiries being made. Whilst we will of course deal with any enquiry for existing clients, it is not now Company Policy to accept any new clients who have worked/work on “vessels” that are not ships per the guidelines set out by HMRC (see links below).
We recommend that anyone in the midst of or contemplating a claim for Seafaring Status visits the following link:-
http://www.hmrc.gov.uk/manuals/eimanual/EIM33001.htm – et seq.
Foreign Tax Credits
UK residents working overseas can claim credit for tax paid overseas to offset UK tax liability arising on the overseas income, provided original documentation to support this is obtained.
Budget News
Whilst no apparent changes were made in the Budget directly affecting Britons working abroad who are or will be Not Resident/Not Ordinarily Resident, because of changes to the top rates of income tax from 6/4/10, the potential withdrawal of Personal Allowances and the restriction of tax relief to Basic Rate with high incomes could mean considerably increased UK tax liabilities for Britons working abroad who either pay full UK income tax in respect of foreign earnings or receive tax relief in respect of foreign tax deductions.
Basically the top rate of income tax from 6/4/10 will be 50% (42.5% on dividends) for individuals with incomes of more than £150,000.
The Personal Tax Allowance (£6,475 from 6/4/09) will be withdrawn at the rate of £1.00 for every £2.00 of income over £100,000 from 6/4/10.
Tax relief on personal pension contributions will be restricted to the Basic Rate for individuals with incomes over £180,000 from 6/4/11 and relief will be tapered for incomes over £150,000. From 22/4/09, only Basic Rate tax relief will be available on pension contributions where the contributions exceed the greater of £20,000 a year or the individual’s normal pattern of contributions.
We stress again that the above changes will not affect any clients who are definitely regarded as Not Resident/Not Ordinarily Resident but for any clients or Britons out there who remain liable to UK income tax it is worthwhile looking at your situations to decide if there is any way tax liabilities can be minimised.
IR20/HMRC 6
At long last HM Revenue & Customs have produced a new booklet, for guidance only, concerning Residence/Domicile Status.
Anyone wishing to consider possible claims for Non Residence status would be well advised to read both booklets bearing in mind that much of the HMRC 6 relates to Domicile and should not be confused with Residence.
