The “Ashcroft question”: Can I, too, escape the UK tax net?

You are unlikely to have missed the unprecedented level of media comment about the tax residence and domicile of several public figures and their apparent ability to avoid paying UK tax on at least part of their income. There has also been speculation about a possible exodus of talent from the UK as the higher tax rates and potentially less friendly pension contribution treatment impact on UK residents.
Even before tighter domicile provisions start to bite in the UK we have seen a string of (mostly successful) court cases brought by Her Majesty’s Revenue and Customs (HMRC) on the meaning of residence and ordinary residence in the UK.
Those coming to work in the UK can limit their UK tax exposure on arrival, particularly if split service contracts are used for UK and non-UK duties. It is also possible to escape the UK tax net if you go abroad for full-time work, although there are increasingly tight rules governing visits to the UK to retain family, social and other ties. (The 90 days a year maximum was once interpreted as excluding the days of arrival and departure, but now they too are counted.)
If however you are retiring or merely electing to live abroad then the UK tax situation is far more fraught. A much more distinct break from the UK is required and migrants need expert financial planning advice to ensure they do not inadvertently make costly mistakes in what is an extremely complex situation. For over 15 years the experts at Montfort International plc have been providing exactly this advice to their clients. For a free, no obligation chat contact them on 01483 202072 or info@miplc.co.uk.

New incentive for Australian residents to declare offshore income

The net is closing on those who live in Australia and who have undeclared overseas assets, pensions, ISA’s, shares or foreign pension schemes.
Australian Tax Commissioner Michael D’Ascenzo’s urges Australian residents who may not have declared all income from offshore activities to “do the right thing to get their tax affairs in order” by 30 June 2010.
According to Geraint Davies, Managing Director of Montfort International, Australia is not alone. ‘Qualifying Recognised Overseas Pension Schemes (QROPS) have been seen as the solution to the taxation issues created by non-declaration of UK pension schemes to foreign jurisdictions, but this is not necessarily the right move. In fact some people may have exempt income so suitable financial advice for the country of residence is an absolute must.’
“Australia has highly sophisticated processes and systems to trace fund flows around the world and they are getting better at it,” says Davies. “Banks and other overseas tax jurisdictions can easily identify people with undeclared income. What were once considered highly complex and sophisticated arrangements to dodge liability now provide easy pickings.”
Australia has tax information exchange agreements with nine countries and more will soon follow. With over forty overseas jurisdictions having signed a Double Tax Agreement with Australia, only the most naïve will want to make a non-declaration stance with the Australian Taxation Office (ATO). The ATO matches data supplied by overseas revenue agencies, financial institutions and AUSTRAC with income tax returns to identify undeclared foreign income and to identify Australian residents involved in foreign transactions.
In 2007 the ATO made a similar offer and as at 31/10/09 more than 3,000 disclosures had been made, totalling over $306 million in omitted income and raising nearly $65 million in liabilities.
“Tax advisers have told us of clients with undisclosed foreign income want to come forward to set things right, but are concerned about the consequences of doing so, particularly the potential for criminal investigation,” Mr D’Ascenzo said.
“People can now approach us anonymously for an indication of whether we would initiate an investigation to determine whether there is a potential breach of the criminal law. In making this decision, we will often seek advice from an appropriately qualified panel which will include external members’
“This offer is not valid if we commence an audit so I remind people again — contact us before we contact you. There’s a much higher price to be paid later if we discover undeclared income through an audit process. Penalties can be as high as 90 per cent, and we will seek prosecution in serious cases. There is nothing wrong with holding an offshore account or investing overseas as long as you pay any Australian tax due, however we will continue to focus on the misuse of offshore financial arrangements.”
The new offer doubles the shortfall penalty from 5% to 10% should a person’s additional income from offshore activities be more than $20,000 in a tax year.
There is some comfort for those with additional taxable income of $20,000 or less in a tax year as they will not have to pay a shortfall penalty for that year. This remains unchanged from the previous initiative.
For more information and assistance on structuring your finances for migration to Australia, please do not hesitate to contact the adviser team at Montfort International on 01483 202072.

Tax Haven Australia?

If you plan to retain UK assets when you migrate to Australia you need to be aware of your tax burden in both countries say migration finance experts Montfort International plc (www.miplc.co.uk).
Your Australian tax position for your foreign income is affected by your visa status. For instance a holder of a temporary contributory parent visa subclass 173 will benefit from most types of foreign income and capital gains not being assessable to Australian tax - such as UK pensions and gains arising upon sale of UK assets. On the other hand, the Australian Tax Office (ATO) would seek to tax the holder of a contributory parent visa subclass 143 on their worldwide income.
What with there being hundreds of visa permutations, one shouldn’t necessarily assume that local Australian advisers are as well-informed on whether you qualify for the foreign income exemption, meaning you may miss out on valuable tax benefits.
The good news is, migrating on a temporary visa can provide excellent tax planning opportunities. Provided you time the sequence of events correctly, you can dispose of assets without any liability to UK or Australian Capital Gains tax, as well as investing your capital to provide tax free income to you in Australia. These benefits coupled with the fact that there are no death duties in Australia, makes the Retirement Investor visa an attractive option for wealthy retirees. Montfort International’s holistic approach of providing integrated visa and financial advice is designed to enable our clients to maximize the tax benefits available to those migrating under a temporary visa.
Whatever your financial intentions, seeking advice from the qualified advisers at Montfort International by calling 01483 202072 or freephone 0800 018 3571 or emailing info@miplc.co.uk, before you finalise your migration plans can help you to a less taxing life ‘Down-under’.