Proceeds of Crime Act 2002 came into force in 2004 which has added administrative burdens to the way financial intermediaries approach new clients and also the movement of money. “Know Your Client” (KYC) has turned into “Committing a Crime and Going to Jail for 14 Years for not Knowing Your Client and the Source of their Funds”
The Finance Act 2003 brought into existence Stamp Duty Land Tax from the 1st of May, 2004 closing certain exemptions and adding further documentation and disclosure requirements to property transactions.
Appeals from the New Zealand Court of Appeal may no longer be brought to the Privy Council. The New Zealand Supreme Court is now the highest court of New Zealand.
 Items of Interest in the UK 2004 Budget
Personal Tax Rates and Allowances
For 2004–05, the lower, basic and higher rates of income tax remain at 10%, 22% and 40% respectively.
The starting rate band is increased by £60 to £2,020 and the basic rate band by £840 to £29,380 (so that the higher rate applies to taxable income in excess of £31,400).
The special rates applicable to dividends and other savings income are unchanged.
The income tax rates applicable to discretionary and accumulation trusts are increased to 32·5% (previously 25%) on dividend income and 40% (previously 34%) on other types of income.
The basic personal allowance is increased by £130 to £4,745. For this and other personal reliefs.
EU Company Tax
The government intends to bring in the tax changes necessary to align tax law with the European Company Statute (ECS) in Finance Bill 2005.
The ECS, which applies directly as law in member states, comes into force on 8 October 2004. It permits the formation of a ‘European Company’ (‘Societas Europaea’ or ‘SE’) which will be subject to the tax law in the country in which it is resident.
The operative date of some of the necessary tax changes depends on the ‘Mergers Directive’ (MD) (90/434/EEC), which may have some impact on transactions which can be carried out to form SEs, or be entered into by them. The MD may not be finalised until 1 January 2005 or later. The government will consult on the changes required to allow for formation of SEs later in 2004.
Offshore Funds
Changes will reform the tests to determine whether or not a fund qualifies for ‘distributor status’ and will apply from the first account period of an offshore fund ending on or after the date of Royal Assent of the Finance Act 2004. The aim of the changes is to bring more investments within the scope of being ‘distributing’ which will mean that a UK investor will have the same tax treatment as if they had invested in an equivalent UK fund.
The new rules reform the tests for distributor status in the following ways—
The UK Equivalent Profits test, ie where at least 85% of their income as shown in their annual accounts must be distributed annually, will follow UK corporation tax rules more closely. Also, it will adopt the ‘loan relationships’ rules, used by all UK companies, in place of the ‘accrued income scheme’ rules applying for income tax.
The investment restrictions will be abolished. Instead, if a fund crosses certain investment thresholds it must demonstrate that any underlying investments also satisfy the ‘distributor’ tests.
Separate sub-funds and share classes of funds can now qualify on their own and will not be affected by non-qualifying sub-funds or share classes within the same fund.
Some consequential changes will also be made to the existing tax rules to ensure that an offshore income gain will arise where an investor switches between a non-distributing and a distributing share class of the same fund or sub-fund.
Anti Avoidance
Disclosure Requirements
From a date to be announced, a new regime is to be introduced requiring promoters of certain tax-avoidance schemes and, in some cases, taxpayers using such schemes to disclose details of the scheme to the Inland Revenue. Penalties will apply for non-compliance. The new provisions will apply to schemes and arrangements if a benefit is the obtaining or a tax advantage and certain other conditions are met. These further conditions will be designed to target schemes based on financial and employment-based products. The tax treatment of particular transactions remains unaffected.
Promoters of schemes within the new regime will have to provide a description of the scheme to the Revenue shortly after it is sold, including details of the types of transactions involved, the tax consequences and the statutory provisions relied upon. The Revenue will register each reported scheme and provide a reference number which the promoter will have to pass on to taxpayers using the scheme. Such taxpayers will then have to include the reference number on their tax returns. If a scheme within the new rules is purchased from a non-UK promoter or devised in-house, the taxpayer concerned will have to fulfil the disclosure requirements shortly after the scheme is purchased or first implemented.
Seminars
Michael Reason presented a seminar to the Institute of Chartered Accountants of New Zealand (ICANZ) London Branch in February. Around 95 Chartered Accountants attended the seminar on the subject of New Zealand Pre-Immigration Tax Planning and the New Zealand Foreign Trust regime.
Michael Reason presented a seminar to a firm of tax advisors made up of advocates and accountants in Mexico in April. The subject was using the UK as an tax efficient international trading jurisdiction.
With many complex changes taking place in the UK tax, legal and constitutional landscape, Michael Reason is proposing to commence a series of seminars dealing with tax and legal issues catering to the needs of the firm’s clients and contacts. Suggestions for an Autumn seminar topic are welcome and indications of interest in seminars on the following topics would be appreciated:-
- Tax efficient acquisition of UK property by non-UK domiciles
- New Zealand Pre-Immigration Tax Planning
|
