1. Stephanie Churchill Associate Director 07528 970158 Tax Risk, Disputes and Investigations – an offshore perspective Jacqui Fleming Senior Manager 07528 970021

2. Topics covered this evening  HMRC’s new ways of working  Schedule 36 information requests  HMRC’s disclosure campaign – who’s next?  Residency issues  Domicile

3. HMRC’s new ways of working  Previously investigations – then enquiries – now “Compliance checks”  Aim to be less confrontational  “Informal” approach now being adopted  Any less serious?

4. Schedule 36 information requests  Information now requested, rather than demanded in the first instance  Closely linked in with Schedule 36 requests – the “formal” approach  Should we comply with an informal request?  What is HMRC’s entitlement?  Talk to a tax adviser

5.  Sch 36 FA 1988 covers HMRC’s information and inspection powers  Para 1 requires a person to provide information or produce documents reasonably required for the purpose of checking their tax position  Para 2 refers to another person’s tax position  “Tax position” is a person’s position as regards any past, present and future tax liabilities

6.  Inspection powers – without warrant:  prior agreement  7 days by notice  announced or unannounced  An officer…may enter business premises and inspect:  the premises  business assets on those premises  business documents on those premises if the inspection is reasonably required for the purpose of checking the tax position

7.  Restrictions:  that person  enter premises – not force entry  inspect only – not search or interview  HMRC cannot “search, rummage or wander around unaccompanied without the taxpayer’s consent”  What is a business premises?  part of a house?  office upstairs?

8. HMRC’s disclosure campaign – who’s next?  Recent use of S36 notices  Tax Health Plan – not as successful as anticipated  Fewer disclosures under the New Disclosure Opportunity than expected  Increased access to the LDF  HMRC intending to target further trades – no details yet but likely to be linked to “high risk” profiles

9. Residence Should be simple……………… Only one statutory test and that is whether or not an individual has been physically present in the UK for 183 days or more in a tax year To work out whether this has been breached, now need to look at where the individual is at midnight BUT  a day trip will not count as a day of residence  concessions exist for passengers travelling through the UK

10. Non – Resident? BUT – what about trying to leave the UK?  Natural and ordinary meaning?? HMRC 6 – can it be relied upon?  Huitson case might help Need to demonstrate a ‘clear and distinct break’ Can you rely on 90 day rule? Recent case law developments  Gaines-Cooper  Grace  Shepherd

11. Gaines - Cooper UK Position  HMRC successfully contended no distinct break  Wife and children remained in the UK  UK property available for use  Regular contact with friends  Pheasant shooting!  Rolls Royce Enthusiast Club  Regular attendance at garden opera  Child attended school here  English Will Non UK Links  Plantation Bois Noir  Family pets  Wish to have ashes scattered there  Reef Golf Course membership  Fishing / bird island  Personal belongings / photographs  National Council for Children

12. BUT: Courts ruled that there was not enough evidence to support that Mr Gaines-Cooper had made a distinct break, neither were his subsequent visits to the UK for a ‘temporary purpose’ Result – UK domiciled, resident and ordinarily resident!

13. The Future? HMRC/professional bodies working to agree a statutory residence test to try and provide those tax payers seeking to achieve non-residency some certainty. No draft legislation yet but watch this space! Now part of residence/ domicile review

14. To look out for….. Clients who have historically claimed non-residence but retain link with UK If leaving now, have to advise to:  Sell property (or get long term tenants)  Stay outside UK for first whole tax year if possible  Keep visits to a minimum until HMRC have accepted non resident claim  Don’t remain a member of any clubs or associations in the UK  Take your immediate family with you!!

15. Domicile Often confused with residency BUT very different concept ‘Permanent home’ - not influenced by:  Number of days spent in the UK  Where you are tax resident

16. Three means of establishing domicile:  Domicile of origin  Domicile of dependence  Domicile of choice

17. Where’s your father from?! That is the question!

18. Domicile of origin Default domicile Always the domicile of your father at the time you were born (if a marital child) or your mother (if non-marital child) Sounds simple? Not always! Domicile of origin from Father Domicile of origin

19. Domicile of dependence Applies to:  Children under 16 years of age –Domicile will automatically change if parents change theirs –At age 16, will automatically adopt domicile of choice  Women married before 1 January 1974 –Automatically adopted domicile of husband –When legislation changed in 1974, treated as adopting a domicile of choice if married at this date –Positive action needs to be taken to lose this!

20. Domicile of choice Can renounce domicile of origin or dependency in favour of domicile of your choice BUT can be extremely difficult to establish a new domicile At the very least:  Need to leave country of origin and relocate with intention of living there permanently  Need to demonstrate intention to reside outside country of origin with positive actions

21. Deemed domicile UK IHT purposes only Provisions apply if:  resident in UK during any three previous tax years  resident in UK in not less than seventeen of the previous twenty tax years If deemed domiciled – liable to UK IHT on worldwide assets, regardless of actual domicile status But doesn’t apply to Italy, Pakistan and India

22. India / Pakistan Extended definition of domicile for inheritance tax Treaty overrides UK "deemed domicile" rule Convert UK situs assets into non-UK status assets Immediate inheritance tax saving at 40% Legal opinion in India/Pakistan required regarding domicile status under Indian / Pakistan law Local Will needed to distribute assets on death

23. Practical aspects of establishing your domicile Cultural ties  Where were they born / their parents?  What ties/ links do they have with their country of origin?  What social ties are there? Family / Social clubs/ religious groups? Home  Where is the family home? Will  Where do they intend to be buried? Investments  Property?  Shares?  Bank accounts? Relatives  Where were they married?  Was it an arranged marriage?  Where is their extended family? Language  What is their first language?

24. Testing your domicile Disclosing offshore sources of income on tax return to prompt HMRC enquiry Transfer assets into a trust above Nil Rate Band  Need to create a tax charge of at least £10,000 before HMRC will take the point

25. Remittance Basis Charge Brought in from 6 April 2008 £30,000 charge plus payments on account PLUS loss of personal allowances / CGT annual exemptions Payable under self assessment 2008/09 was first year for paying the charge Applied to:  Anyone over 18  With foreign income in excess of £2,000  Who has been UK resident for 7 of the last 9 tax years  Who wants to claim the remittance basis of taxation

26. Practical issues Making the claim  The self assessment form! Cagey clients Record keeping!! Nominated income / accounts  £1 or more?  Identifying the source and type of income

27. When is a remittance not a remittance?! Relevant persons –  doesn’t include adult children  Watch out for grandchildren and school fees though!!! Exempt property  Public access rule – works of art, collectors items  Personal use –Clothing, Footwear, Jewellery, Watches  Repair / Restoration  Temporary importation <275 days with public access  Notional amount remitted < £1,000

28.  Questions?

29. Contact details  stephanie.churchill@rsmtenon.com stephanie.churchill@rsmtenon.com  Mobile: 07528 970158  Jacqui.fleming@rsmtenon.com Jacqui.fleming@rsmtenon.com  Mobile: 07528 970021