As I advise high net-worth individuals who have global connections, the current crisis is keeping me busy advising on a plethora of issues concerning residency status, pre arrival and departure planning. Advice has often focused on exceptional circumstances for the purpose of the statutory residence test (SRT) in the light of Covid-19 government guidance issued in March and May. The exception doesn’t fully apply to all tests within the SRT, such as the second and third automatic UK tests and the family, accommodation, work and country ties. Also, with a fall in asset values, the opportunity for intergenerational IHT gift and succession planning has become a primary focus for a number of families.
If you could make one change to tax, what would it be?
Something needs to be done about the high-income child benefit charge. There are multiple issues, such as the higher marginal tax rate between £50,000 and £60,000, the need to know whether child benefit is being claimed and which partner has the higher earnings, and the need to file a self-assessment tax return if the charge applies. Also, there is the unforeseen consequence of not making a child benefit claim in terms of missing out on NI credits. The threshold of £50,000 has remained static since 2012 and a significant uplift would help remove the issue for a group of affected taxpayers.
What do you now know that you wish you’d known at the start of your career?
Never assume anything about a client’s affairs or circumstances. Establishing and checking the facts at the start and during a project pays handsome dividends. In private client work, knowing the relationship between everyone is a prerequisite, especially as the ‘associate’ rules are often at point.
Are there any new rules that are causing a particular problem in practice?
We are working through all the issues associated with the 30-day reporting of residential property disposals which came into effect this tax year. Whereas non-residents have to report all UK residential property sales, residents are exempted in certain situations – such as selling their PPR or a no gain/no loss transaction. The reporting obligation is not well known yet so there is a massive need for client communication. Getting clients to inform us of proposed property transactions when they take place, rather than as part of their year-end filing information, is an essential first step.
Has a recent tax case caught your eye?
The Upper Tribunal case of HMRC v Sippchoice [2020] UKUT 149 is noteworthy not only for the decision that a transfer of shares to a pension scheme was held not to be tax deductible, but also because it raised again the thorny issue of HMRC’s manuals. HMRC’s guidance on in specie contributions was not clear. Judge Sinfield stated that statements in HMRC’s manuals are merely HMRC’s interpretation of the law and do not have the force of law. This matter has come up time and time again (see Aozora [2019] EWCA Civ 1643 on legitimate expectation). It is another warning on the limitations of using HMRC manuals as a research tool. Practitioners referring to statements in the manuals in their advice need to include an appropriate caveat.
What should we look out for later this year?
Just before lockdown, HMRC published a consultation on raising standards in the tax advice market. It’s a wide-ranging document and well worth a read to get an overview on the possible direction of travel. There is an interesting summary on direct compliance interventions and on international models. Due to Covid-19, the closing date of the consultation has been pushed back to 28 August.
And finally, you might not know this about but...
One of my favourite walking places is amongst the rock strewn landscape of the Norber Erratics, which are glacial erratic boulders in the Yorkshire Dales. Absolutely stunning.
As I advise high net-worth individuals who have global connections, the current crisis is keeping me busy advising on a plethora of issues concerning residency status, pre arrival and departure planning. Advice has often focused on exceptional circumstances for the purpose of the statutory residence test (SRT) in the light of Covid-19 government guidance issued in March and May. The exception doesn’t fully apply to all tests within the SRT, such as the second and third automatic UK tests and the family, accommodation, work and country ties. Also, with a fall in asset values, the opportunity for intergenerational IHT gift and succession planning has become a primary focus for a number of families.
If you could make one change to tax, what would it be?
Something needs to be done about the high-income child benefit charge. There are multiple issues, such as the higher marginal tax rate between £50,000 and £60,000, the need to know whether child benefit is being claimed and which partner has the higher earnings, and the need to file a self-assessment tax return if the charge applies. Also, there is the unforeseen consequence of not making a child benefit claim in terms of missing out on NI credits. The threshold of £50,000 has remained static since 2012 and a significant uplift would help remove the issue for a group of affected taxpayers.
What do you now know that you wish you’d known at the start of your career?
Never assume anything about a client’s affairs or circumstances. Establishing and checking the facts at the start and during a project pays handsome dividends. In private client work, knowing the relationship between everyone is a prerequisite, especially as the ‘associate’ rules are often at point.
Are there any new rules that are causing a particular problem in practice?
We are working through all the issues associated with the 30-day reporting of residential property disposals which came into effect this tax year. Whereas non-residents have to report all UK residential property sales, residents are exempted in certain situations – such as selling their PPR or a no gain/no loss transaction. The reporting obligation is not well known yet so there is a massive need for client communication. Getting clients to inform us of proposed property transactions when they take place, rather than as part of their year-end filing information, is an essential first step.
Has a recent tax case caught your eye?
The Upper Tribunal case of HMRC v Sippchoice [2020] UKUT 149 is noteworthy not only for the decision that a transfer of shares to a pension scheme was held not to be tax deductible, but also because it raised again the thorny issue of HMRC’s manuals. HMRC’s guidance on in specie contributions was not clear. Judge Sinfield stated that statements in HMRC’s manuals are merely HMRC’s interpretation of the law and do not have the force of law. This matter has come up time and time again (see Aozora [2019] EWCA Civ 1643 on legitimate expectation). It is another warning on the limitations of using HMRC manuals as a research tool. Practitioners referring to statements in the manuals in their advice need to include an appropriate caveat.
What should we look out for later this year?
Just before lockdown, HMRC published a consultation on raising standards in the tax advice market. It’s a wide-ranging document and well worth a read to get an overview on the possible direction of travel. There is an interesting summary on direct compliance interventions and on international models. Due to Covid-19, the closing date of the consultation has been pushed back to 28 August.
And finally, you might not know this about but...
One of my favourite walking places is amongst the rock strewn landscape of the Norber Erratics, which are glacial erratic boulders in the Yorkshire Dales. Absolutely stunning.
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