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Insights Vol. 6 No. 1: Updates & Other Tidbits

Insights Vol. 6 No. 1: Updates & Other Tidbits

This month, Rusudan Shervashidze and Stanley C. Ruchelman look at several interesting items, including (i) the publication of draft legislation by the Crown Dependencies of Guernsey, Jersey, and Isle of Man calling for the existence of economic substance for resident companies engaged in certain businesses and defining what that means, (ii) the denial of benefits incident to foreign earned income for a military contractor in Afghanistan who maintained a place of abode in the U.S., (iii) an increase in fees charged by the I.R.S. to issue residency certificates, (iv) the establishment of a working group to combat transnational tax crime through increased enforcement collaboration among tax authorities in several countries, and (v) changes to China’s residency rules and the sharing of taxpayer financial information under C.R.S. 

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The U.K. Digital Sales Tax – It Could Be You

The U.K. Digital Sales Tax – It Could Be You

On November 7, 2018, the U.K. government confirmed that it will proceed with the introduction of a digital services tax ("D.S.T.") on large businesses. The tax will be charged beginning April 2020. It will apply to three key areas, which the government has concluded derive a huge value from the participation of U.K. users and are largely untaxed. Eloise Walker of Pinsent Masons, London, provides an overview of the D.S.T., cautioning that problems exist in identifying both the revenue to which the D.S.T. will apply and the hallmarks of jurisdiction that must exist in order for the tax to be imposed.

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U.K. Requirement to Correct

U.K. Requirement to Correct

The “Requirement to Correct” (“R.T.C.”) rules for offshore tax affairs in the U.K. threaten steep penalties if noncompliant taxpayers at April 5, 2017, do not take action to correct the relevant noncompliance by September 30, 2018. In a detailed look at the R.T.C. rules, Gary Ashford of Harbottle & Lewis L.L.P., London, explains the ins and outs of the provisions, including (i) the definition of offshore noncompliance, (ii) covered taxes, (iii) penalties, (iv) the reasonable cause defense, (v) disqualified advice that cannot be reasonable cause, (v) the method that must be followed to implement a valid correction, (vi) the statute of limitations, and (vi) recent guidance from H.M.R.C. regarding last minute notifications by noncompliant taxpayers. The final date for completing a correction is December 29, 2018.

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Failure to Prevent – The Future of Adviser Obligations

Failure to Prevent – The Future of Adviser Obligations

The concept of failure to prevent has grown from its roots in the U.S. Foreign Corrupt Practices Act and is making inroads into the responsibilities of tax advisers.  The recent trend begs the question, do advisors have a duty to prevent the evasion or improper reduction of tax or to report the activity in advance?  A team of international advisors looks at the evolution of obligations: Peter Utterström of Peter Utterström Advokat AB, Stockholm, looks at the origin of the concept.  Gary Ashford of Harbottle & Lewis, London, looks at recently adopted legislation in the U.K. imposing strict liability on advisers to naughty clients.  Lawrence Feld, Attorney at Law, New York, looks at its presence in the U.S. Swiss Bank Program of the Justice Department.  Dick Barmentlo of Jaegers & Soons, Amsterdam, addresses a recent case in the Netherlands that imposes civil liability on a Netherlands trust company and its employees for lost taxes suffered by the Dutch tax administration.

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Doing Business Post-Brexit: What to Expect in the United Kingdom

Doing Business Post-Brexit: What to Expect in the United Kingdom

The U.K. is firmly on course to leave the E.U., with a target date of March 29, 2019.  After a difficult period of 18 months, agreements to address two important “divorce” issues – the exit payment and the status of Brits in the E.U. and Europeans in the U.K. on Brexit Day – have been reached, while a decision has been made to defer discussions regarding the border with Northern Ireland.  Graham Busch of Gerald Edelman, Chartered Accountants, London, addresses these and other settled issues as well as those for which a decision has been kicked down the road.

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The U.K. Trust Registration Service: Impact for Trustees

The U.K. Trust Registration Service: Impact for Trustees

The past few years have seen a steep increase in trust reporting obligations in the context of F.A.T.C.A. and the Common Reporting Standard.  Trustees must come to grips with a new set of record keeping and disclosure obligations introduced by the U.K. Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017, which came into force from June 26, 2017.  Jennifer Smithson and Isobel Morton of Macfarlanes LLP, London, explain the wide-ranging effect of the regulations and the dividing line between non-U.K. trustees that fall inside the regime and those who are outside.

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An American In London: Due Diligence Observations

An American In London: Due Diligence Observations

Performing due diligence on private companies for a potential merger or acquisition has been described as an exercise in educated guessing.  The quality of the target’s financial information, potential hidden liabilities, financing, and similar deficiencies may result in a valuation that is neither straightforward nor reliable.  When the target is abroad, the culture, language, and business norms may cause the educated guess to be more guess and less educated.  Knowing how to overcome this dilemma is a skill set that can be obtained only through experience.  Nick Magone, founder of Magone & Company, P.C., in Roseland, New Jersey, shares his experiences in performing due diligence on potential target companies in the U.K.  His advice?  Numbers are only the beginning.

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Pancake Day – End to Permanent Non-Domicile Status and Charging Non-Doms I.H.T. on U.K. Residential Property

Pancake Day – End to Permanent Non-Domicile Status and Charging Non-Doms I.H.T. on U.K. Residential Property

 In July, the U.K. government announced that proposals removed from the Finance Bill that was announced in March would be reproposed with a retroactive effective date, as if adopted when originally proposed.  This is bad news for non-domiciled individuals (“Non-Doms”) in general and for the estates of Non-Doms who died between March and the ultimate date of enactment.  If retroactive effective dates remain in the bill, rights granted by the European Convention for the Protection of Human Rights and Fundamental Freedoms, which were incorporated into U.K. law by the Human Rights Act 1998, could be violated.  William Hancock and Daniel Simon of Collyer Bristow L.L.P. explain that Non-Doms should expect “too little jam and too little cream” on their pancakes if the provisions are enacted retroactively.

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High-Speed Tax Reform: The U.K. Diverted Profits Tax & Restrictions on Corporate Interest Deductions

High-Speed Tax Reform: The U.K. Diverted Profits Tax & Restrictions on Corporate Interest Deductions

Among the most notable changes made to U.K. corporate tax over the past 24 months are the introduction of the diverted profits tax (“D.P.T.”) and the reduction of tax relief for corporate interest payments.  D.P.T. is aimed at multinationals operating in the U.K. that try to avoid maintaining a permanent establishment in order to escape U.K. corporate tax.  D.P.T. is imposed at the rate of 25% and treaty relief is not available.  The reduction in relief for corporate interest payments implements the recommendations of B.E.P.S. Action 4.  Eloise Walker and Penny Simmons of Pinsent Masons, London, explain the working of these provisions.

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U.K. Drops Changes to Non-Domicile Regime, But Likely Not for Long

U.K. Drops Changes to Non-Domicile Regime, But Likely Not for Long

After months of H.M.R.C. consultation, a new regime was put in place for non-domiciled U.K.-resident individuals (“Non-Doms”) on April 6, 2017, only to see the legislation pulled from Finance Bill 2017 on April 25.  The snap election in the U.K. put consideration of Non-Dom taxation on hold when 72 of the 135 clauses were removed from the bill.  This allowed Parliament to approve the legislation in two hours.  Gary Ashford of Harbottle Lewis, London, summarizes the short-lived provisions and those that failed to be enacted on April 6.  The proposed regime remains a work in process, and enacting legislation could be back on the table as early as this fall.

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U.K. Criminal Penalties for Improper Tax Planning – Could You Be Effected?

U.K. Criminal Penalties for Improper Tax Planning – Could You Be Effected?

New powers have been given to H.M.R.C. in recent legislation, and new criminal and civil penalties have been enacted as part of a massive legislative program designed to stop U.K. residents from participating in offshore tax avoidance and evasion schemes.  Several criminal penalties are directed to advisory firms that facilitated tax offenses.  In certain circumstances, advisory firms based outside the U.K. will be at risk of prosecution.  Gary Ashford of Harbottle and Lewis L.L.P., London, and Stanley C. Ruchelman examine the new provisions.

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A Year of Guest Features

A Year of Guest Features

This month, we reminisce on the best of 2016, with articles contributed by guest authors from around the world.

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U.K. Tax Residency Rules for Individuals and Companies

U.K. Tax Residency Rules for Individuals and Companies

Richard Holme and Simon Tadman of Creaseys, U.K., explain the wonderfully complex set of rules that are applied to determine whether an individual is a resident of the U.K. for income tax purposes and whether a company is a tax resident for corporation tax purposes. Can the new Statutory Residence Test bring certainty to the determination in light of the increase in complexity?

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Insights Vol. 3 No. 9: Updates & Other Tidbits

This month, the authors look briefly at several timely issues, including (i) the filing of appeals briefs in two major cases lost by the I.R.S., Altera and Xilinx, (ii) recent competent authority activity between the U.S. and India, (iii) the future of U.K. automobile assembly plants operated by U.K. subsidiaries of Japanese automakers, and (iv) final State Department rules concerning the revocation of U.S. passports issued to individuals who have a seriously delinquent tax debt.  Kenneth Lobo, Michael Peggs, Nina Krauthamer, and Sultan Arab contribute.

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Further Developments for U.K. Non-Dom Individuals

Further Developments for U.K. Non-Dom Individuals

A significant claw back of benefits for individuals with Non-Dom status was first announced in the Summer Budget of 2015.  In August, H.M.R.C. proposed implementing legislation in a follow-up consultation document.  Specific benefits covered included inheritance tax for shares of envelope companies owning U.K. residential real property, deemed domicile rules for long-term U.K. residents, and several provisions to lessen the impact of these changes.  Gary Ashford of Harbottle & Lewis, London explains.

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U.K. Adopts Public Register of People with Significant Control Over U.K. Corporations

Think you can hide behind a corporate shell in order to avoid notoriety? Think again if you own a company or L.L.P. formed in the U.K. These entities are now being required to maintain a statutory register setting out the individuals who are considered “persons with significant control,” and beginning in July, the registers are to be made available to the public. Naomi Lawson and Melanie Jory of Memery Crystal, London, explain of this new, transparency-seeking legislation and provide commentary on the multitude of potentially adverse consequences.

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Insights Vol. 3 No. 3: Updates & Other Tidbits

In the March 2016 edition of Insights, Kenneth Lobo, Sheryl Shah, and Beate Erwin look at the following recent developments: (i) an A.B.A. recommendation for higher Cuban compensation for seized U.S. businesses, (ii) U.S. inversions and European State Aid investigations targeting U.S. companies, (iii) an increase in the stakes faced by Coca Cola in its transfer pricing dispute with the I.R.S., and (iv) the U.K. reaction to the Google Settlement tax payment.

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The Meanderings of the Taxation of U.K. Real Estate: Where Are We Going?

For those who are considering the acquisition of U.K. real property for personal use, an unhappy surprise awaits. The U.K. government is actively waging a tax campaign against structures commonly used for these acquisitions and referred to derisively as “Enveloped Dwellings.” Increased stamp duty on land transactions, annual tax on Enveloped Dwellings and related capital gains charges, and extended scope of inheritance tax take the sizzle out of high-value purchases. Naomi Lawton of Memery Crystal L.L.P., London ruminates on this puzzling development.

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U.K. Non-Dom Taxation – Where it is and Where it is Going

With the 15-year limit enacted to remittance based tax rules for non-domiciled individuals resident in the U.K., we offer a series of articles this month addressing favorable tax rules for non-domiciled resident individuals in several countries. Gary Ashford of Harbottle and Lewis L.L.P. in London is the lead-off author, explaining the U.K. tax and immigration rules and suggesting strategies for the long-term non-domiciled resident who faces the 15-year ceiling. The ceiling becomes effective in 2017.

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An Englishman in New York – Tax Considerations for Foreign Individuals

The phrases “green card” and “U.S. citizen” have the ability to strike panic and even terror in tax advisors around the world. What inspires this fear? What tax challenges do foreign individuals face when they are present in the U.S. on a temporary, non-immigrant basis?

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