Generic Links

 

Welcome to RL360°'s

dedicated financial adviser website

For financial advisers only

Not to be distributed to, or relied on by, retail clients

Online Services Secure online services

Sign in | Register

Technical development round-up


New restrictions on UK pension contributions

New, straightforward rules will be introduced which limit the amount of tax relief available on pension contributions. From April 2011 the allowance for tax-free contributions will be capped at £50,000 and will stay at this level until 2015/16. Furthermore, the lifetime allowance will simultaneously be reduced from £1.8m to £1.5m (in April 2012). Those paying 50% tax will be able to claim full relief.


This is a stark contrast to the convoluted and over-complicated legislation proposed by the previous UK Government to limit relief on earnings over £150,000. Irrespective of the fact that the new rules are far more straightforward, the changes do mean that middle class earners, rather than just the super rich, will be hit. The UK Government has also decided to clamp down on certain offshore pension arrangements and, as such, funded Employer-Financed Retirement Benefit Schemes (EFERBS) may no longer be a viable option.


Clearly those individuals who have, until now, sought to maximise pension contributions will be looking at alternative investments as there is little point in paying into something that cannot be accessed, and is heavily restricted if there is no tax benefit in doing so. For individuals looking for investment flexibility, access and tax deferral, offshore bonds could be considered.


Guernsey under EU pressure

Guernsey is reaching a critical point in its jousting with the European Union over its allegedly ‘harmful’ zero-ten corporate tax regime. Like Jersey and the Isle of Man, the zero-ten regime was actually introduced to meet criticisms from the EU Code of Conduct Group.


In late 2009, Guernsey was told that its new corporate tax regime was not in accordance with the spirit of the EU Code of Conduct and although (like Jersey and the Isle of Man) Guernsey has agreed to review the regime, it has not yet decided on the details. It is assumed that a flat 10% rate of corporation tax will be introduced, but as yet nothing has been decided. One option is to refuse to change anything at all. However, this would appear to be unlikely.


Taxpayers must use Liechtenstein tax amnesty before HMRC contacts them

Taxpayers with undeclared liabilities in offshore accounts must make a disclosure under the Liechtenstein tax amnesty before they receive letters from HM Revenue and Customs (HMRC) or risk criminal prosecution and fines. HMRC is currently writing to hundreds of HSBC customers with Swiss bank accounts informing them that they are under suspicion for tax fraud. HSBC customers in receipt of those letters have now lost the opportunity to save potentially hundreds of thousands of pounds in tax and fines by making a disclosure under the Liechtenstein Disclosure Facility (LDF).


HMRC’s LDF offers reduced penalties to individuals and businesses with undeclared income or gains held in offshore bank accounts or investments if they make a full disclosure. Under the terms of the LDF, taxpayers will be required to pay the tax due on income and gains on their unassessed tax liabilities, as well as interest and, in most cases, a fixed 10% penalty. Under the LDF, account holders will only be required to come clean for the period from April 1999, rather than the usual 20 year period. In addition, the LDF offers immunity from prosecution, but for tax fraud only.


Many HSBC customers who received letters from HMRC will have been eligible for the LDF, but it is likely that only a minority will have seized the opportunity. Those that did not register for the LDF will now be feeling quite sorry for themselves as the opportunity has been lost.


The HMRC letters are as a result of buying a list of UK-resident account holders from a rogue HSBC employee. It is evident that HMRC is now clearly prepared to use whatever information it can lay its hands on to identify taxpayers with offshore accounts.