ShedDweller Posted October 16, 2010 Share Posted October 16, 2010 Met a chap I know today at the playpark (like you do!) children are friends with his children .. He does business stuff (administering LTD companies that sort of thing ..) .. Did the usual "How's business" he told me it was amazing .. he's never been so busy .. Apparently there is a rumour knocking around among the Rich/Superrich that the government is about to introduce a massive simplification of the tax system. The rumour goes that ownership of property in the United Kingdom will be enough on it's own for the Inland revenue to prove tax domicile in the UK .. He has been busy organising limited companies for people so that the company owns the house and pays the mortgage and then rents the property out to the non UK taxpayer. I was very interested in this as you can imagine .. I asked what happens if the bank will not transfer the mortgage to the limited company and he told me that this was a big problem the banks wanted 50% equity before they would agree to a transfer .. I then asked what about capital gains tax ? Apparently none of his clients see any capital gain in their property for at least 10 years so this is not an issue .. and any capital loss would be a good thing .. Personally I don't believe the government would do this, and his opinion was that the these people were probably over reacting .. But it's interesting that some people obviously believe it enough to take some action over their assets .. Quote Link to comment Share on other sites More sharing options...
miko Posted October 16, 2010 Share Posted October 16, 2010 Met a chap I know today at the playpark (like you do!) children are friends with his children .. He does business stuff (administering LTD companies that sort of thing ..) .. Did the usual "How's business" he told me it was amazing .. he's never been so busy .. Apparently there is a rumour knocking around among the Rich/Superrich that the government is about to introduce a massive simplification of the tax system. The rumour goes that ownership of property in the United Kingdom will be enough on it's own for the Inland revenue to prove tax domicile in the UK .. He has been busy organising limited companies for people so that the company owns the house and pays the mortgage and then rents the property out to the non UK taxpayer. I was very interested in this as you can imagine .. I asked what happens if the bank will not transfer the mortgage to the limited company and he told me that this was a big problem the banks wanted 50% equity before they would agree to a transfer .. I then asked what about capital gains tax ? Apparently none of his clients see any capital gain in their property for at least 10 years so this is not an issue .. and any capital loss would be a good thing .. Personally I don't believe the government would do this, and his opinion was that the these people were probably over reacting .. But it's interesting that some people obviously believe it enough to take some action over their assets .. Whether they do this or not I do hope that they do do somthing to make the super rich who live here pay their taxes like everyone else. Quote Link to comment Share on other sites More sharing options...
ShedDweller Posted October 16, 2010 Author Share Posted October 16, 2010 Whether they do this or not I do hope that they do do somthing to make the super rich who live here pay their taxes like everyone else. Whatever they do the very richest will always pay no tax .. with that much money at stake there will always be loopholes .. But it's interesting that people are planning for a move by the government .. What I also found interesting was that banks have lent money to non dom's .. this chap was saying that he would have more clients if the lenders would agree to the mortgages being transferred to LTD companies .. some of the non doms do not have stella incomes and losing 1/3 of their income in tax would be a big deal .. If they do do it however (which I doubt to be honest) then it could be the thing of Sibleys nightmares .. suddenly a load of mid priced property hitting the market at the same time .. people who went out to the Middle East for a few years and kept the family home here in the UK .. (and I know several people in this position) and now either have to sell the house or move back to the UK or pay tax on their overseas income .. (Some countries we have double taxation rules such as the US and the EU countries and they would not be affected) .. Quote Link to comment Share on other sites More sharing options...
miko Posted October 16, 2010 Share Posted October 16, 2010 What I also found interesting was that banks have lent money to non dom's .. Lent money to non dom's at the peak of the stupidity they were lending it to people with just work permits . Worked on new build sales at the height of the boom. I saw overseas people buy a flat with a fake deposit ( builder gave false price to the bank so it looked like they were putting in 15% ) they let the flat and put the rent in their pocket untill the place got repossessed. Utter madeness and the banks knew what was going on . That is why there have been blocks of flats in places like Thamesmead where 82 out of 84 flat's were repossessed. Quote Link to comment Share on other sites More sharing options...
okaycuckoo Posted October 16, 2010 Share Posted October 16, 2010 I wonder what the double taxation implications would be from the domicile rule change. Would other countries accept it for treaty purposes? Sounds iffy. Quote Link to comment Share on other sites More sharing options...
ShedDweller Posted October 16, 2010 Author Share Posted October 16, 2010 (edited) I wonder what the double taxation implications would be from the domicile rule change. Would other countries accept it for treaty purposes? Sounds iffy. As I understand it (and I may well be wrong) if you live the US (for instance) you do not have to pay tax in the UK on your US earnings because we have a double taxation treaty with the US .. So for instance you have a job with an American company and they pay you and you pay the American IRS then there are no implications for you however long you spend in the UK in a year .. The same is true of the EU (I'm not sure how this works for Nordic countries with very high income tax like Denmark as you could just say you live in Germany) .. If it's not a tax treaty country then you must not spend more than 90days in the UK or you will be deemed a resident .. So imagine you work for an Oil company based in a Gulf state with 0% income tax then you still pay no income tax as long as you don't spend 90 days in the UK .. The fact that you were born here and your kids go to school here and you own a house here is not relevant. Some people have been doing almost silly things working for British Banks in the city but domiciled in Monaco. (remember a "Day" is a FULL day ... so arrive on Monday morning stay Monday night stay Tuesday and leave the country Wednesday night and that is only one day of your "Allowance") As I understand it the rumour is that the 90day thing will stay but that ownership of a property will automatically make you (or your company) a British resident for tax purposes .. There was a very embarrassing thing for the HMRC where they were leasing their buildings from an offshore company who were not paying tax in the UK .. the rumour is that that now be impossible .. Edited October 16, 2010 by ShedDweller Quote Link to comment Share on other sites More sharing options...
wherebee Posted October 16, 2010 Share Posted October 16, 2010 another unworkable idea, unless the IR plans on identifying every bit of land/property owned up to a human beneficial owner and working out where they live THAT tax year and whether they are tax treaty covered. The IR wont even invest resources to catch onshore tax cheats, let alone being able to focus on offshores at some point in the future! and if they do? simples - trusts or LLCs based in the US. No way of getting to the ultimate BO, and the UK gvt will NEVER piss off the US by drawing attention to the fact. still, if it is creating income for your mate, good luck. second thoughts - the only way you could do it is a LVT on the property. But that would hurt the british rich list waaaaaay too much. Quote Link to comment Share on other sites More sharing options...
Redcellar Posted October 16, 2010 Share Posted October 16, 2010 As I understand it (and I may well be wrong) if you live the US (for instance) you do not have to pay tax in the UK on your US earnings because we have a double taxation treaty with the US .. So for instance you have a job with an American company and they pay you and you pay the American IRS then there are no implications for you however long you spend in the UK in a year .. The same is true of the EU (I'm not sure how this works for Nordic countries with very high income tax like Denmark as you could just say you live in Germany) .. If it's not a tax treaty country then you must not spend more than 90days in the UK or you will be deemed a resident .. So imagine you work for an Oil company based in a Gulf state with 0% income tax then you still pay no income tax as long as you don't spend 90 days in the UK .. The fact that you were born here and your kids go to school here and you own a house here is not relevant. Some people have been doing almost silly things working for British Banks in the city but domiciled in Monaco. (remember a "Day" is a FULL day ... so arrive on Monday morning stay Monday night stay Tuesday and leave the country Wednesday night and that is only one day of your "Allowance") As I understand it the rumour is that the 90day thing will stay but that ownership of a property will automatically make you (or your company) a British resident for tax purposes .. There was a very embarrassing thing for the HMRC where they were leasing their buildings from an offshore company who were not paying tax in the UK .. the rumour is that that now be impossible .. Not quite right. You claim tax relief on the tax you paid in the USA, and since US taxes are less, you will typically still owe HMRC something. Also the days bit I don't think is right. The day you land is day 1 and the day you leave is also counted as a day. 90 days or more and you will be liable for tax. So buying house vs. renting doesn't seem to be a tax dodge. Quote Link to comment Share on other sites More sharing options...
ShedDweller Posted October 16, 2010 Author Share Posted October 16, 2010 Not quite right. You claim tax relief on the tax you paid in the USA, and since US taxes are less, you will typically still owe HMRC something. Also the days bit I don't think is right. The day you land is day 1 and the day you leave is also counted as a day. 90 days or more and you will be liable for tax. So buying house vs. renting doesn't seem to be a tax dodge. I'm pretty sure about the "Full days for tax purposes" as I'm sure I remember it being brought up on the PM program a while ago .. it may be that that's what these guys ARGUE .. and the Inland revenue has not clarified it yet .. The point was made that you could do a four day week in the city and still not be resident for tax purposes .. The thing about the US sounds right but remember that you would only have to pay the difference if you spent more than 90 days in the UK. As far as "The inland revenue don't investigate" .. well as someone who has just had a tax inspection I can promise you they do .. BUT the whole point is that people HAVE to live by the rules so they don't risk losing everything .. Anyway it would be obvious in allot of cases .. Big house in Chelsea without a registered taxpayer .. HMRC database and google maps would see that in seconds .. or someone having not paid tax for 10 years suddenly appears paying PAYE .. if they were deemed to have been resident in the UK for those ten years because they owned a house .. then it's twice the tax over the last ten years .. The reason I even mention it is that it does seem that it would simplify matters enormously in what has been a grey area that loses the country a huge ammount of money .. Quote Link to comment Share on other sites More sharing options...
MongerOfDoom Posted October 16, 2010 Share Posted October 16, 2010 As I understand it the rumour is that the 90day thing will stay but that ownership of a property will automatically make you (or your company) a British resident for tax purposes .. The 90-day exemption cannot be sensibly relied on ever since a court decided that a person's "life and interests" had gravity, and that gravity had a center. http://business.timesonline.co.uk/tol/business/law/article7029806.ece Quote Link to comment Share on other sites More sharing options...
TheLine Posted October 16, 2010 Share Posted October 16, 2010 Met a chap I know today at the playpark (like you do!) children are friends with his children .. He does business stuff (administering LTD companies that sort of thing ..) .. Did the usual "How's business" he told me it was amazing .. he's never been so busy .. Apparently there is a rumour knocking around among the Rich/Superrich that the government is about to introduce a massive simplification of the tax system. The rumour goes that ownership of property in the United Kingdom will be enough on it's own for the Inland revenue to prove tax domicile in the UK .. He has been busy organising limited companies for people so that the company owns the house and pays the mortgage and then rents the property out to the non UK taxpayer. I was very interested in this as you can imagine .. I asked what happens if the bank will not transfer the mortgage to the limited company and he told me that this was a big problem the banks wanted 50% equity before they would agree to a transfer .. I then asked what about capital gains tax ? Apparently none of his clients see any capital gain in their property for at least 10 years so this is not an issue .. and any capital loss would be a good thing .. Personally I don't believe the government would do this, and his opinion was that the these people were probably over reacting .. But it's interesting that some people obviously believe it enough to take some action over their assets .. This rings true to me, in some way these non-doms will be taxed. I think its not uncommon, for instance in Spain all non-residents must pay a tax which assumes they are renting the property and hence the rental income becomes taxable. Works out to be a percentage of the property value. If you say you are not renting, then they start checking your electricity and water bills, if they find you are using the property for longer than 6 months then you are whacked with all the taxes that come with the joys of being a Spanish resident. Spain had let this one slip for many years, but in 2009 they started to actively follow-up on non-resident owners properties. Seems like a damn fine plan to me. Quote Link to comment Share on other sites More sharing options...
South Lorne Posted October 17, 2010 Share Posted October 17, 2010 ...from Shedweller As I understand it the rumour is that the 90day thing will stay but that ownership of a property will automatically make you (or your company) a British resident for tax purposes .. ...could be similar to Australia recently which banned non residents from buying property as they were creating a bubble in many cities ....this could be a play on it....in other words you can buy if you are a non-dom ...but you will be resident for tax purpose henceforth .....seems a good idea .....if this is what it entails ...but that would be too idealistic to seriously expect...just speculate..... Quote Link to comment Share on other sites More sharing options...
Bloo Loo Posted October 17, 2010 Share Posted October 17, 2010 snip. He does business stuff (administering LTD companies that sort of thing ..) .. Did the usual "How's business" he told me it was amazing .. he's never been so busy .. snip WTF is Administering LTD Companies mean? selling them is ebay level, running them is Director level, and taxing them is accountant level. what this has to do with rumours of the super rich is beyond me. And if to prove Domicile a property was sufficient, then the answer is so simple....sell them and rent..live in a hotel...whatever. This anecdotal comes from the source as written...the playground. Quote Link to comment Share on other sites More sharing options...
ShedDweller Posted October 17, 2010 Author Share Posted October 17, 2010 WTF is Administering LTD Companies mean? He sets then up sends accoutns to companies house, advises people .. There are loads of companies doing similar work .. Quote Link to comment Share on other sites More sharing options...
Andy D Posted October 17, 2010 Share Posted October 17, 2010 Just do it like the US... If you have a US passport, you must file a US tax return. Then all we have to fix is the non-doms Andy Quote Link to comment Share on other sites More sharing options...
SarahBell Posted October 17, 2010 Share Posted October 17, 2010 Once property is in a company though what taxes have to be paid on it? Quote Link to comment Share on other sites More sharing options...
Buccaneer Posted October 17, 2010 Share Posted October 17, 2010 I'm pretty sure about the "Full days for tax purposes" as I'm sure I remember it being brought up on the PM program a while ago .. it may be that that's what these guys ARGUE .. and the Inland revenue has not clarified it yet .. The point was made that you could do a four day week in the city and still not be resident for tax purposes .. The thing about the US sounds right but remember that you would only have to pay the difference if you spent more than 90 days in the UK. As far as "The inland revenue don't investigate" .. well as someone who has just had a tax inspection I can promise you they do .. BUT the whole point is that people HAVE to live by the rules so they don't risk losing everything .. Anyway it would be obvious in allot of cases .. Big house in Chelsea without a registered taxpayer .. HMRC database and google maps would see that in seconds .. or someone having not paid tax for 10 years suddenly appears paying PAYE .. if they were deemed to have been resident in the UK for those ten years because they owned a house .. then it's twice the tax over the last ten years .. The reason I even mention it is that it does seem that it would simplify matters enormously in what has been a grey area that loses the country a huge ammount of money .. Since last year the test is whether you are in the country at midnight. So if you arrive one day and leave the next it counts as a single day for tax purposes. Prior to that the days of arrival and departure did not count so in the previous example no days would count for tax purposes. Quote Link to comment Share on other sites More sharing options...
Bloo Loo Posted October 17, 2010 Share Posted October 17, 2010 He sets then up sends accoutns to companies house, advises people .. There are loads of companies doing similar work .. yeah, course they do, they are called accountants. pop into staples...they even have a kit to set them up..DIY, or buy one off the shelf from hundreds of firms that do the forms and rename them for you. its hardly brain science. Quote Link to comment Share on other sites More sharing options...
ShedDweller Posted October 17, 2010 Author Share Posted October 17, 2010 yeah, course they do, they are called accountants. pop into staples...they even have a kit to set them up..DIY, or buy one off the shelf from hundreds of firms that do the forms and rename them for you. its hardly brain science. I'm sure that his buisness will disappear now that you have sussed him out ... Quote Link to comment Share on other sites More sharing options...
Bloo Loo Posted October 17, 2010 Share Posted October 17, 2010 (edited) I'm sure that his buisness will disappear now that you have sussed him out ... Tax lawyers and IFAs are in much abundence. Not sure how you think the Inland revenue have the time to check who lives in all the houses in Chelsea and see if they are paying any tax. Tax detection works by falling over stuff. An evader will try to be as exposed to the HMRC as little as possible. Its so much easier to harrass the little guy with a small business who at least submits some returns and pays some tax. Edited October 17, 2010 by Bloo Loo Quote Link to comment Share on other sites More sharing options...
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