The UK government hauled in £5.2bn ($7.2bn, €5.9bn) of inheritance tax receipts during the 2017/18 tax year, a figure 8% higher than the previous year.

The 8% rise, representing £400m, for the latest tax year comes despite the government introducing the residence nil-rate band (RNRB) allowance in April 2017.

The RNRB, combined with the traditional nil rate band, allows married couples to pass on a family home worth up to £850,000 tax-free.

Under the government’s current plans, the RNRB will be increased each year until 2020, when a married couple will be able to bequest a home worth £1m tax free.

£400m more

The latest rise extends the steadily rising trend for return for the government from this tax, with HM Revenue and Customs data showing that  inheritance tax receipts have increased by 100% in just seven years.

In a Financial Times article, HMRC said it expected inheritance tax receipts to fall as the RNRB allowance increases.

“The allowance was only available from April 2017, much of the tax received dates from before the new relief took effect,” HMRC told the Financial Times.

Order to chaos

Despite HMRC expecting inheritance tax receipts to drop, many experts say people are not taking advantage of the allowances as they are extremely complex.

In January the UK Treasury acknowledge that inheritance tax is “particularly complex” and requested that the Office of Tax Simplification (OTS) carry out a review.

George Bull, senior tax partner at RSM UK, said the review provides a “crucial” opportunity to simplify inheritance tax.

“Without a doubt, there is a continuing need for these reliefs but somewhere along the way they have lost their original focus. Now is the time to review that,” Bull said.

I would also have to agree, so many of the people I meet do not think of doing a review or find it difficult to discuss, however this is so important not just for succession planning but to secure your lifetime’s work, savings, investments without paying HMRC even more.

I would be happy to meet for coffee, either in person or conference call and we can discuss things further.

All the best

Stuart

CEO

Farringdon Group

+60 3 2026 0286

Courtesy of International Adviser

Setting Up an Offshore Company & What does it Mean

If you are running a business overseas and your revenue is not sourced from your country of residence, you may want to seriously consider an offshore company. BVI, Samoa, Seychelles, Marshall Islands, Belize, Anguilla; these are tax efficient countries.

What does that mean?

It means tax efficiency on income, profits, capital gains and estate. Therefore, there is more leniency with the authorities with tax returns and reporting and some may not require any (Please ask me for more info). Except for the Seychelles, all other jurisdictions have no requirement to file annual returns also.

Many people don’t realize the ease of maintenance – there is no annual statutory filing to worry about like Singapore or a Hong Kong company since there is no requirement to lodge any returns. The client just needs to pay the annual fees at the time of renewal and that’s it.

In terms of costs to run, they are also pretty small. You can set up a company for a few thousand dollars and annually they cost less than a 1000 dollars to run. When you consider that you may be paying 20% or more in tax on company earnings that can be significant in terms of saving.

If you are concerned about disclosure, you needn’t be; directors and shareholders information are not on public records and this information is not searchable even if 3rd parties pay for a company search. Such information is kept at the Registered Office and Registry (for register of directors only) and if anyone requests for such information, the request will be forwarded to the owners but nothing will be provided, unless there is a court order for various other reasons.

Offshore companies are also widely accepted and understood by the international financial community – it is possible to open bank accounts in Singapore and all that is needed is a bank visit and possible interview. We can also arrange for offshore bank accounts in Mauritius, Puerto Rico and Cook Islands. No visit is required for these offshore banks.

If you have an interest why not get in touch?

I can be contacted at syeomans@farringdongroup.com or +60 2026 0286

All The Best

Stuart

Courtesy of BBC News

I thought I would share this information with you as it is quite significant numbers and HMRC will definitely be looking at this with a fine tooth comb, potentially making new legislation or even imposing more taxation implications, let’s see.

A quarter of property in England and Wales owned by overseas firms is held by entities registered in the British Virgin Islands, BBC analysis has found.

The Caribbean archipelago is the official home of companies that own 23,000 properties – more than any other country.

They are owned by 11,700 firms registered in the overseas territory.

The finding emerged from BBC analysis conducted of Land Registry data on overseas property ownership.

The research found there are around 97,000 properties in England and Wales held by overseas firms, as of January 2018.

It adds to concerns that companies registered in British-controlled tax havens have been used to avoid tax.

Close behind the British Virgin Islands (BVI), which has a population of just 30,600, are Jersey, Guernsey and the Isle of Man.

Of the properties owned by overseas companies in England and Wales, two thirds are registered to firms in the British Virgin Islands, Jersey, Guernsey and the Isle of Man.

Where are the properties owned by overseas companies located?

Click or tap on the properties owned by companies registered abroad to find out more

Map built by Carto. If you can’t see the map, please click here to open the same story on the BBC News website.

Note: Property locations are approximate based on the centre point of the postcode they fall into. As such they have been removed when the map is zoomed to the most detailed levels. Ownership information like the company name and country refer to the ultimate owner of the property, not necessarily the person or company that may rent or occupy the property.

Many foreign UK property owners are also officially headquartered in Hong Kong, Panama and Ireland.

The analysis provides a new picture of ownership of property by overseas companies in England and Wales following a decision last November to make the database public and free to access.

It found:

• Close to half (44%) of all properties owned by overseas companies in England and Wales are located in London
• More than one in ten (11,500) properties owned by overseas companies in England and Wales are located in the City of Westminster
• More than 6,000 properties owned by foreign companies are in the London borough of Kensington and Chelsea.

The government of the British Virgin Islands said it was incorrect to label the country as a tax haven.

It said that there were many practical reasons why UK properties might be owned by companies incorporated in the BVI.

It argued that BVI companies can bring together multiple investors and owners, which is useful for big commercial property deals that have investors in more than one country.

The BVI also said that it shared “necessary information” including ownership details with relevant authorities.

Among those entries in the database that disclosed a price, the most expensive was the former headquarters of the Metropolitan Police, New Scotland Yard, at 8-10 Broadway.

The site was purchased by the Abu Dhabi Financial Group in 2014 for £370m from the Mayor of London’s office. But it is officially owned by a Jersey-based company called BL Development.

The 1967 multi-storey block has now been demolished to make way for “a luxury collection of one to five bedroom apartments across six architecturally striking towers”. These range in price from £1.5m to more than £10m.

The leasehold of Admiralty Arch, the former government building off Trafalgar Squarer that straddles one end of The Mall, was sold to hotel developer Prime Investments for £141m. It is registered to a Guernsey-based entity, Admiralty Arch Hotels Ltd.

While the most expensive buildings are commercial properties such as hotels and office blocks in prime central London locations, many are residential properties rather than business premises.

Take Green Street, London W1 – a residential street of highly-desirable four-storey redbrick Victorian terraces, fronted by smart wrought-iron railings.

Walking east to west you’ll pass one terraced residence owned, according to the latest records, from the Turks and Caicos Islands by a company called Alliance Property Ltd. Next door is another residence owned by Lily Holding & Finance Inc, registered in BVI.

In all, 15 properties on the street are owned by companies registered in the British Virgin Islands, four in Jersey and one in the Isle of Man. Others have owners in Italy, Hong Kong and Singapore.

Accountants used to recommend using an offshore company to overseas buyers of property in the UK as a means of avoiding inheritance tax when the owner passed away.

“Until April 2017, if you weren’t resident in the UK and held a residential property via a company it was not counted as being an asset for UK-based inheritance tax purposes. So having a property through an offshore company meant you escaped inheritance tax,” says Mark Giddens, of accountants and consultants UHY Hacker Young.

However, since last year the government announced plans to close the loophole, dramatically reducing the attractions of offshore ownership of residential property.

Offshore jurisdictions such as BVI still offer buyers who wish to keep their names out of the public realm greater privacy than they would enjoy if they purchased their property as an individual.

While most tax havens have agreed to take part in automatic information exchange, allowing law enforcement agencies to discover the individuals who enjoy beneficial ownership of an offshore company, their names will not appear in the published data.

In contrast to residential properties owned by individuals, the Land Registry does not always release “price paid” figures for properties owned by companies.

Adding up the 27,835 properties whose most recent sale prices we know, the price paid was just over £55 billion.

Notes: The BBC analysed the January 2018 Overseas Companies Ownership data made public by the HM Land Registry. The data is accurate up to January 2018 and contains around 97,000 title records of freehold and leasehold property in England and Wales, registered to companies incorporated outside the UK. The map shows 71,000 of the 97,000 addresses. Those missing had incomplete data.

All the best & have a good day

Stuart

CEO

Farringdon Group

+60 3 2026 0286

‘Accidental Americans’ Putting Asia’s Wealth Transfer at Risk

Courtesy of International Advisor

Accidental Americans face ruin if their estates are not properly structured, a lawyer has warned.

Accidental Americans are often children who are born in the United States but do not grow up there, children who are born outside of America but are automatically US citizens due to having a US citizen parent, or non-US citizens who live abroad but have a green card.

Erik Wallace, a Hong Kong-based US tax lawyer, says he has seen undiminished interest in US citizenship and residency from wealthy individuals in Asia.

A lot of people go to the US to give birth to make their offspring US citizens – Chinese families often do it because they want their children to have the option of a US college education. Another option is to acquire green cards for the family, often through a residency by investment programme; such as the EB-5, US Investor Visa Programme.

While US citizenship creates opportunities in life, it also creates tax complications.

The problem comes in because the US is one of two jurisdictions (the other being Eritrea) to tax its citizens on their global income and capital gains.

FATCA

The US tightened the enforcement of the rules in 2008 when the Internal Revenue Service (IRS) began going after Swiss banks who it believed were assisting Americans hide assets.

The IRS then launched a highly publicised Offshore Voluntary Disclosure Programme in 2009 and imposed additional reporting obligations on non-US financial institutions in 2010 through Fatca (Foreign Account Tax Compliance Act).

Generally, a US person must file a tax return or provide account information even if no US tax is due. Failure to do so comes with hefty civil, and potentially criminal, penalties.

The US grants a foreign earned income credit and a foreign tax credit that often means taxpayers based overseas, particularly those residing in high-tax jurisdictions like the United Kingdom, have no US tax due. However, the taxpayer must still file a tax return to avail themselves of these credits.

Further, the taxpayer must report their non-US bank accounts in most circumstances on a form known as the Foreign Bank and Financial Accounts (FBAR), regardless of whether tax is due. For US taxpayers living in low-tax jurisdictions, like Hong Kong, they often owe tax with their US tax returns.

The Importance of Estate Structuring

The US also imposes US federal estate tax on its citizens (at rates currently up to 40%) on the fair market value of a US person’s global estate when they pass away.

“If an estate is not properly structured, the US estate tax can be disastrous for the family, especially if combined with the local estate or inheritance tax,” explains Wallace.

“If a family wants to leave a business to a US child, it can become subject to this 40% tax, which has been historically 50%. You are looking at the loss of the business before you reach the third generation.

“With proper structuring the US federal estate tax can be avoided or the impact minimised; there is nothing egregious about that and it doesn’t have to be expensive,” advises Wallace.

Some families would prefer to pay to set up a private trust company – it takes time and money but it gives the family more control.

Doing nothing and simply avoiding US tax collectors is not an option. Wallace warns that the IRS is “quite aggressively” going after the “low hanging fruit” with fines and back taxes.

“It has never been a more dangerous time to remain non-compliant due to Fatca as the IRS is collecting information from around the world about financial institution’s US account holders,” he said.

“However, the IRS currently has in place a streamlined programme which allows these ‘accidental Americans’ to get back into compliance by filing three years of tax returns and six years of FBARs and explaining their situations. But this streamline programme remains open at the discretion of the IRS, so act fast.”

If you would like to know more and how we can assist, we also have our SEC license in Singapore so we are regulated and experienced in assisting US Citizens.

All the best & have a good day

Stuart

CEO

Farringdon Group

+60 3 2026 0286