Zurich Tax Handbook 2009-2010

Table of Contents

• Key changes
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Preface

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Abbreviations

• 1 INTRODUCTION: PRINCIPLES OF TAX PLANNING AND HOW TO USE THIS BOOK
• 1.1 Introduction 1.2 What's new for 2009/2010? 1.3 General strategy 1.4 Planning points if you are employed 1.5 If you are thinking of becoming self-employed 1.6 If you are already in business 1.7 Investments and capital gains tax 1.8 Business tax and finance 1.9 Managing your investments and your family’s financial affairs 1.10 Tax issues if you are non-resident or have a foreign domicile 1.11 Ensure that all important deadlines are kept
• PART 1 SELF-ASSESSMENT
• 2 SELF–ASSESSMENT
• 2.1 Self-assessment (SA) 2.2 New features of the 2009 SA form 2.3 Online filing of SA tax returns 2.4 Short tax return 2009 2.5 Ten golden rules for dealing with your 2009 tax return 2.6 Common errors 2.7 Providing additional information 2.8 Finding your way around the SA form
• 3 HMRC & YOU
• 3.1 Understanding your responsibilities and rights 3.2 The tax return process 3.3 Revenue enquiries into tax returns 3.4 What penalties can the Revenue impose? 3.5 Remission of tax by the Revenue 3.6 Error or mistake relief 3.7 Codes of practice 3.8 Revenue information and advice 3.9 Statements of practice and extra-statutory concessions 3.10 Complaints and compensation 3.11 Revenue Adjudicator
• 4 EMPLOYMENT
• 4.1 Basis of assessment 4.2 How tax is collected 4.3 Allowable expenses 4.4 Benefits-in-kind in general 4.5 Company cars 4.6 Free use of assets 4.7 Beneficial loans 4.8 Living accommodation 4.9 Miscellaneous benefits 4.10 Share incentives 4.11 Options to acquire gilts 4.12 Options to acquire other company assets 4.13 Golden hellos 4.14 Restrictive covenants 4.15 Redundancy payments 4.16 Golden handshakes, other termination payments and continuing benefits 4.17 Designing a ‘tax efficient’ remuneration package
• 5 SHARE INCENTIVES
• 5.1 Gifts of shares 5.2 Profit-sharing schemes 5.3 Non-approved share options 5.4 Approved share option schemes 5.5 Enterprise Management Incentives (EMI) 5.6 Special shares, etc 5.7 The employer’s perspective 5.8 Some tax planning ideas
• 6 SELF-EMPLOYMENT
• 6.1 How self-employed individuals pay tax 6.2 Are you really self–employed? 6.3 Basis of assessment 6.4 Partnerships 6.5 Limited liability partnerships (LLPs) 6.6 Partnerships controlled outside the UK 6.7 Relief for trading losses
• 7 INCOME FROM UK PROPERTY
• 7.1 Basis of assessment and administration 7.2 How to calculate your taxable profit 7.3 Lump sums deemed to be rent (premiums) 7.4 ‘Rent-a-room’ relief 7.5 Furnished holiday accommodation 7.6 ‘Buy to let’ investments 7.7 Capital allowances on investment properties 7.8 Mineral royalties 7.9 Woodlands 7.10 Pros and cons of having a property investment company 7.11 VAT considerations 7.12 Interest earned on trust funds for service charges and sinking funds
• 8 SAVINGS INCOME
• 8.1 Bank and building society interest 8.2 Other interest income 8.3 Loans to individuals and other private loans 8.4 Gilts and loan stocks 8.5 Rate of tax deducted at source 8.6 Accrued income scheme 8.7 Deeply discounted securities 8.8 Dividends 8.9 Sundry receipts treated as dividends 8.10 Foreign interest and dividends 8.11 Tax treatment of exchange–traded funds
• 9& Foreign real estate income 9.2 Alimony and maintenance payments 9.3 Investment in overseas partnerships 9.4 Double tax relief 9.5 Foreign pensions 9.6 Sale of certificates of deposit 9.7 Gains from roll–up, and other offshore, funds 9.8 Miscellaneous income 9.9 Taxation of commission, cashbacks and discounts 9.10 Annuities, trust income, etc
• 10 ALLOWABLE DEDUCTIONS
• 10.1 Alimony and maintenance 10.2 Loans used to purchase an annuity from an insurance company 10.3 Loans to purchase investment property 10.4 Loans to invest in partnerships 10.5 Loans to invest in close companies 10.6 Loans to invest in employee-controlled companies 10.7 Loans to purchase plant and machinery 10.8 Alternative finance ‘products’ 10.9 Gift Aid 10.10 Gift of listed shares and securities 10.11 Gift of land and buildings 10.12 Annuities, etc 10.13 Trade union and friendly society subscriptions 10.14 Life assurance premiums 10.15 Community Investment Tax Credit (CITC)
• 11 ALLOWANCES AND TAX CREDITS
• 11.1 Personal allowances 11.2 The basic personal allowance 11.3 Married couple’s allowance 11.4 Pensioner couples 11.5 Allowances recently abolished 11.6 Blind persons 11.7 Time limits 11.8 Tax credits from 6 April 2003
• 12 CAPITAL GAINS TAX
• 12.1 Outline of CGT 12.2 CGT and the self–assessment form 12.3 Who is subject to CGT? 12.4 What assets are chargeable assets? 12.5 Which types of transaction may produce a chargeable gain? 12.6 Hold–over relief where a gift is a chargeable transfer for IHT purposes 12.7 Amount to be brought in as disposal value 12.8 What costs are allowable? 12.9 Assets held at 31 March 1982 and 6 April 1965 12.10 Other acquisition values 12.11 Taper relief 12.12 Indexation 12.13 Working out your capital gain 12.14 Assets that have attracted capital allowances 12.15 How gains are computed on quoted securities 12.16 Unquoted shares 12.17 When may a chargeable gain arise on foreign currency? 12.18 Special rules for disposals of chattels 12.19 Specific rules that apply to disposals of land and investment properties 12.20 Disposal of foreign property 12.21 Gains and losses on second–hand insurance policies
• 13 YOUR MAIN RESIDENCE
• 13.1 Main residence exemption 13.2 Possible restrictions on exemption 13.3 Living in job–related accommodation 13.4 Treatment where property not occupied throughout ownership period 13.5 Passing on the family home – CGT considerations 13.6 Anti-avoidance provisions 13.7 Stamp duty
• 14 THE TAX CALCULATION
• 14.1 Some points to look out for
• PART 2 BUSINESS TAX AND FINANCE
• 15 COMPUTATION OF BUSINESS PROFITS AND CAPITAL ALLOWANCES
• 15.1 Computation of trading profits 15.2 Capital allowances 15.3 Pre-trading expenditure 15.4 Post-cessation receipts 15.5 Post–cessation expenses
• 16 CAPITAL GAINS TAX AND BUSINESS TRANSACTIONS
• 16.1 Loans to private businesses 16.2 Losses on unquoted shares 16.3 Relief for replacement of business assets 16.4 Hold-over relief for gifts of business property 16.5 Partnerships and capital gains 16.6 Transfer of a business to a company 16.7 Business taper relief 16.8 Entrepreneurs relief 16.9 Earn–outs 16.10 Sales of shares to all–employee share trusts
• 17 TAX AND COMPANIES
• 17.1 Who pays corporation tax? 17.2 Self-assessment 17.3 How ‘profits’ are defined 17.4 Accounting periods, rates and payment of tax 17.5 Loan relationships 17.6 Intangible assets 17.7 Companies’ capital gains 17.8 Dividends 17.9 Losses 17.10 Double taxation relief on foreign income 17.11 Groups of companies 17.12 Investment companies 17.13 Close companies 17.14 Real Estate Investment Trusts (REITs) 17.15 Corporate venturing 17.16 Research and Development (R&D) tax credits 17.17 ECA tax credits 17.18 Transfer pricing rules 17.19 Claims, elections and penalties
• 18 FINANCING YOUR BUSINESS
• 18.1 Financing through own resources 18.2 Financing through personal borrowing 18.3 Issuing additional shares (with and without tax incentives) 18.4 Borrowing through the business 18.5 Financing assets 18.6 Cash flow management
• 19 SHOULD YOU OPERATE THROUGH A COMPANY?
• 19.1 nbsp; Possible disadvantages 19.3 Capital gains tbusiness to a company or LLP
• 20 &nHMRC
• 20.1 Employers 20.2 Contractors 20.3 IR35 20.4 Managed Service Companies (MSCs) 20.5 Non–resident landlord scheme 20.6 Non–resident sportsmen and entertainers 20.7 Other payments to non–UK resident persons
• 21 OUTLINE OF VAT
• 21.1 Introduction 21.2 Legal authorities 21.3 Liability to VAT 21.4 Practical implications 21.5 Anti–avoidance measures 21.6 Special schemes 21.7 Control and enforcement procedures 21.8 Fraud 21.9 Appeals
• 22 NATIONAL INSURANCE CONTRIBUTIONS
• 22.1 Class 1 contributions 22.2 Class 2 contributions 22.3 Class 3 contributions 22.4 Class 4 contributions
• PART 3 WEALTH PLANNING
• 23 WEALTH PLANNING BY MANAGING YOUR FINANCIAL AFFAIRS
• 23.1 Your family and personal financial planning 23.2 Managing your investments 23.3 Tax deductible investments 23.4 Some special situations 23.5 Planning for retirement 23.6 Helping the next generation 23.7 Estate planning
• 24 TAX EFFICIENT INVESTMENT
• Investments providing tax exempt return
• 24.1 Individual savings accounts (ISAs) 24.2 Personal equity plans (PEPs) 24.3 National Savings investments 24.4 Friendly society investments
• Investments qualifying for tax deduction
• 24.5 Enterprise investment scheme (EIS) 24.6 Venture capital trusts (VCTs) 24.7 Enterprise zone trusts 24.8 Investment in film partnerships
• 25 PENSIONS
• Registered pension schemes
• 25.1 New regime that came into force on ‘A’ Day 25.2 Retirement benefits under the new regime 25.3 Pension scheme investments under the new regime 25.4 Tax relief for contributions
• Other retirement benefit schemes
• 25.5 Unapproved schemes
• State benefits
• 25.6 State pension benefits 25.7 Contracting out
• 26 INVESTING IN REAL ESTATE
• 26.1 ‘Buy to let’ investments 26.2 Private investment companies 26.3 Limited liability partnerships (LLPs) 26.4 Investing surplus funds within a trading company 26.5 Buying overseas property 26.6 Quoted property companies 26.7 Property funds offered by insurance companies 26.8 Pension funds
• 27 LIFE ASSURANCE
• 27.1 Introduction 27.2 Qualifying and non–qualifying policies 27.3 Taxation of life policy proceeds 27.4 Offshore life policies 27.5 Annuities 27.6 Permanent health insurance (PHI) 27.7 Pre–owned assets charge 27.8 Life policies effected by companies 27.9 Life policies in trust affected by FA 2006 IHT changes 27.10 Discounted gift schemes
• 28 CAPITAL GAINS TAX PLANNING
• 28.1 Make use of annual exemptions for both spouses/civil partners 28.2 Realise gains to avoid wasting the annual exemption 28.3 Make sure you get relief for capital losses 28.4 Save tax by making gifts to relatives 28.5 Claim roll–over relief on furnished holiday accommodation 28.6 Make the most of entrepreneur’s relief 28.7 Selling the family company
• 29 INHERITANCE TAX AND INDIVIDUALS
• 29.1 Who is subject to IHT? 29.2 When may a charge arise? 29.3 Transfers of value 29.4 Certain gifts are not transfers of value 29.5 Exempt transfers 29.6 Potentially exempt transfers 29.7 Reservation of benefit 29.8 Business property 29.9 Agricultural property and woodlands 29.10 Computation of tax payable on lifetime transfers 29.11 Tax payable on death 29.12 Life assurance and pension policies 29.13 Heritage property 29.14 Planning: the first step
• 30 THE TAXATION OF TRUSTS
• 30.1 When are trustees liable to pay income tax? 30.2 When are trustees liable for UK capnbsp; Bare trusts 30.4 Fixed–interest trusts 30.5 Discretionary trusts 30.6 Accumulation and maintenance trusts 30.7 Trusts for the disabled 30.8 Protective trusts 30.9 Trusts for the most vulnerable 30.10 Charitable trusts 30.11 Miscellaneous aspects 30.12 Executors and personal representatives 30.13 Some planning points
• 31 PASSING ON YOUR FAMILY BUSINESS
• 31.1 Basic strategy 31.2 Setting up children in business 31.3 Bringing a child into partnership 31.4 Bringing a child into the family company 31.5 Outright gifts of shares 31.6 Why trusts are still often a suitable vehicle 31.7 Demergers
• PART 4 ANTI–AVOIDANCE LEGISLATION
• 32 ANTI–AVOIDANCE
• Income tax
• 32.1 Interest income 32.2 Transactions in land 32.3 Transactions in securities 32.4 Transfer of assets overseas 32.5 Trust income taxed on the settler 32.6 Transactions involving loans or credit 32.7 Pre–owned assets
• Capital gains tax
• 32.8 Bed and breakfast transactions 32.9 Disposals by a series of transactions 32.10 Transfers to a connected person 32.11 Qualifying corporate bonds (QCBs) 32.12 Value shifting 32.13 Trusts and main residence exemption 32.14 UK–resident settlements where settler has retained an interest 32.15 Deemed disposal when a trust ceases to be resident 32.16 Offshore companies 32.17 Non–resident trusts
• Inheritance tax
• 32.18 Purchased interests in excluded property settlements 32.19 Ramsay principle 32.20 Registration of tax schemes 32.21 Specific income tax avoidance schemes that have been blocked
• PART 5 RESIDENCE, DOMICILE AND INTERNATIONAL MATTERS
• 33 RESIDENCE STATUS
• 33.1 Consequences of residence in the UK 33.2 Various criteria for determining residence status 33.3 Individuals who are resident but not ordinarily resident 33.4 Basis on which individuals are regarded as ordinarily resident 33.5 Ceasing to be resident in the UK 33.6 UK income and capital gains received by non–residents 33.7 Non–resident investment companies 33.8 When tax should be withheld from payments to non–residents
• 34 THE INCOME AND CAPITAL GAINS OF FOREIGN DOMICILIARIES
• 34.1 Meaning of ‘domicile’ 34.2 £30,000 special charge for some remittance basis users from 2009–9 34.3 What constitutes a remittance?
• Earned income
• 34.4 Foreign emoluments 34.5 Travelling expenses 34.6 Subsistence allowances for employees seconded to the UK 34.7 ‘Corresponding payments’ 34.8 Overseas pension funds 34.9 Self–employment 34.10 Partnerships controlled outside the UK 34.11 Pension benefits
• Investment income
• 34.12 The remittance basis for investment income 34.13 Position if foreign domiciliary acquires UK domicile 34.14 Managing the remittance basis
• Capital gains tax
• 34.15 Remittance basis for capital gains on foreign assets 34.16 Use of offshore companies and trusts
• Inheritance tax
• 34.17 UK and foreign situs property
• 35 BEING SUBJECT TO TWO TAX REGIMES
• 35.1 General principles 35.2 Working abroad 35.3 US citizens living in the UK 35.4 UK nationals with second home overseas 35.5 Exchange of information
• 36 SOME SPECIAL TYPES OF TAXPAYER
• Specific occupations and trades
• 36.1 Authors 36.2 Barristers and advocates 36.3 Doctors 36.4 Dentists 36.5 Farmers 36.6 Independent financial advisers (IFAs) and insurance agents 36.7 Lloyd’s underwriters (‘Names’) 36.8 Ministers of religion 36.9 Members of parliament 36.10 Sub–postmasters 36.11 University lecturers 36.12 Venture capitalists and participants in MBOs 36.13 Seafarers 36.14 Entertainers 36.15 Business economic notes
• Specific rules for certain types of individuals
• 36.16 Crown servants working overseas 36.17 Irish nationals living in the UK 36.18&nHARITIES AND NOT FOR PROFIT ORGANISATIONS
• 37.1 Charities 37.2 Community amateur sports clubs 37.3 Mutual associations 37.4 Holiday clubs and thrift funds 37.5 Investment clubs
• 38 STAMP DUTIES
• 38.1 Stamp duty reserve tax (SDRT) 38.2 Stamp duty land tax (SDLT)
• 39 SOCIAL SECURITY BENEFITS
• 39.1 Taxable benefits 39.2 Non–taxable benefits 39.3 Tax credits
• 40 TAX TABLES
• Glossary
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Index