The Chancellor’s Budget delivered to Parliament on 8 July 2015 contained a number of announcements relevant to EU claims and cross border transactions, including:
Retrospective Protection for HMRC from Interest on Unpaid Judgment Debts
Effective on and after 8 July 2015, the normal rate of interest paid by judgment debtors on unpaid judgments (8% p.a.) will no longer apply to HMRC. Instead HMRC will only be required to pay the Bank of England base rate plus 2% p.a. simple when it does not pay a judgment when due. This will apply even to pre-existing debts. HMRC’s special rate is set at below the rate established in the FII and Littlewoods litigation as commensurate with the minimum remedy required by EU law for interest upon repaid VAT and other taxes levied in breach of EU law.
Permanent Non-Dom Status Abolished
Permanent “non-dom” status will be abolished from April 2017. From that date, anyone who has been resident in the UK for 15 of the past 20 years will be deemed UK domiciled for tax purposes. In addition, those who had a domicile in the UK at the date of their birth will revert to having a UK domicile for tax purposes whenever they are resident in the UK, even if under general law they have acquired a domicile in another country. A detailed consultation document on the proposals will be published after the summer recess and a further consultation will follow on the draft legislation which is intended to form part of the 2016 Finance Bill.
Twinned with this is the announcement that the government intends to bring all UK residential property held directly or indirectly by foreign domiciled persons into charge for inheritance tax purposes, even when the property is owned through an indirect structure such as an offshore company or partnership.
Some Other Provisions
(2) losses and surplus expenses of the current year, and
(3) losses and surplus expenses arising in other group companies (group relief).
According to HMRC’s Tax Information and Impact Note, the measure will also amend the rules restricting the use of carried forward losses in Part 14B of CTA 2010 (“tax avoidance involving carried-forward losses”) to “put beyond doubt” that they apply to arrangements involving CFCs.
(2) HMRC will open a time-limited disclosure facility in early 2016, but on tougher terms than the previous offshore disclosure facilities HMRC have operated.
(3) If non-compliant taxpayers continue to conceal their tax affairs, HMRC will enforce tough penalties for offshore evasion through the existing offshore penalty regime, new civil penalties for tax evaders and the new simple criminal offence for failing to declare taxable offshore income and gains.
HMRC will informally consult the professionals affected to develop communications including the points above. Regulations will be made after Royal Assent and after the informal consultation has concluded and are expected to have effect from early 2016.
The Summer Finance Bill 2015 will be published on 15 July 2015.
This article appears in the JHA July 2015 Tax Newsletter, which also features: