February 2, 2012

France - Top earners to be hit by new tax.

The French National Assembly has adopted a provision introducing an exceptional tax on top earners in France for the 2012 budget.

Initially, the government proposed imposing a 3% tax on income in excess of €500,000. However this was criticised by opposition parties as they felt it did not go far enough. So by way a compromise the new provision provides for a 3% tax on income of between €250,000 and €500,000, and for a 4% tax on income in excess of €500,000.

Under the revised plans, the tax is expected to affect around 25,000 households in France and to generate in the region of €410m for the state budget.  The government plans to abolish the tax once the public deficit in France returns to 3% of gross domestic product (GDP) in 2013.

In spite of this possible levy, top earners should not be too quick to consider relocation. There are still some tax advantages which can make living in France an attractive tax jurisdiction for the top earners.

France - Football Transfer Tax

The French Government is proposing to introduce a possible transfer tax for football players. The transfer fees between European clubs often run into tens of millions of euros. This levy, if implemented, is aimed to reduce the French deficit by approximately EUR10m a year.

This proposal is a result from the pressure from the majority Union for a Popular Movement (UMP) party to introduce a 3% ‘exceptional’ tax on sporting transfers. This is in addition to the government’s proposed exceptional tax on top earners in France, provided for within the framework of the 2012 budget bill.

It has been recognised by many that such a proposal may not be as fruitful as football transfers are often abroad.

This tax, if implemented, could result in fewer French players in the premier league clubs.

Swiss - An end to marriage tax 'penalty'?

In order to eradicate any unconstitutional imbalances, the Swiss federal administration has proposed a bill to be adopted by summer 2012.  The aim of the bill is to ensure that the tax burden on married couples and married pensioners with a dual income does not exceed the burden imposed on cohabiting couples in a similar economic situation. The bill will also seek to ensure that the burden on married couples with a single income is not greater than married couples with a dual income, in relation to their ability to contribute.

Married couples in Switzerland should assess any likely changes to their tax bill.  

UK - Footballers using ‘perfectly honest’ tax schemes

Last year there have been a number of headlines reporting the use of tax avoidance schemes by professional footballers and their agents.  These schemes are now expected to place footballers on a collision course with HMRC who are targeting high net worth individuals to try and claw back unpaid tax.

Schemes such as player’s image rights being owned by a company or payments for the use of their image being paid into off-shore companies can be perfectly legitimate ways to avoid paying the 50% tax rate.  However, if you are a high earner, such as a professional footballer, you should expect that your tax affairs may come under scrutiny.  Therefore it is important that your affairs are in order. 

To avoid paying the tax for high earners of 50% there are ways of structuring payments to reduce your tax exposure. It is best that you receive expert advice before undertaking these schemes to avoid risking a large bill from HMRC in the future.

UK - Specialist unit is set up to target offshore tax cheats!

The Offshore Co-Ordination Unit (OCU) will oversee and co-ordinate HMRC’s compliance work to identify and pursue those who hide income and capital in offshore accounts to avoid UK tax and duties.

Wealthy individuals who are, or who might be, liable for UK tax and who have offshore accounts, assets or other structures should review their holdings to see if there are likely to be targeted by HMRC.

UK - Stamp Duty Land Tax Reminder

The deadline for the Stamp Duty exemption for first time buyers is looming.  If transactions are not completed by 25th March 2012 first time buyers will be out of time to benefit from the stamp duty incentive.

If you are thinking of buying your first property make sure that you get your offer in quickly to allow enough time for the transaction to go through to benefit from this incentive.

September 30, 2011

France – Proposed 2012 Budget announced

In a bid to tackle France’s deficit, the French Government has announced a further reduction on the rate of Scellier. Individuals who acquire new properties for the purpose of renting benefit from a tax reduction, namely Scellier. It has proposed a reduction of the rate from 22% to 14%.

The Government has also proposed new income tax rates for year 2011/2012, which are as follows:

In August 2011, the Government announced a new 3% tax on income of €500,000 and above. It is now being suggested that this 3% tax should apply to income of €250,000 and above.

It remains to be seen whether these proposed changes will be adopted by the Senat later this year.

If you are in the process of buying a new French rental property, it may be prudent to get the acte de vente signed before 31 December 2011 to benefit from the 22% reduction just in case the Senat agrees with the French Government.

Switzerland – UK and Swiss Tax deal complete

The expected deal between the UK and Switzerland to tackle the problem of UK tax evasion has come to fruition last month. Under the new agreement existing funds held in Switzerland that are taxable in the UK will be subject to a one off deduction of between 19% – 34%; this will not be applicable if tax has already been paid. These deductions will be made after 31 May 2013.

Moving forward there will be a withholding tax on any incomes from investment or gains of 48% or 27% for UK residents with funds held in a Swiss account. This will also be in force from 2013.

This agreement should prompt UK residents who have funds in a Swiss account that are not paying UK tax, to consider the implications of continuing to keep their money there.

UK – Beware of unregulated will writers

It is not necessary to be legally qualified to provide a will writing service in the UK however there is a risk when not using a solicitor that if you are not satisfied with the service provided there is no redress. The Legal Ombudsman regulates the service provided by qualified lawyers but this does not include legal services provided by unqualified lawyers.

In their first report the Legal Ombudsman has highlighted the amount of complaints they receive about unregulated will writers that they are unable to follow up. They also made consumers aware that unregulated services will not have insurance in place in the eventuality that they need to compensate the consumer if they have made a mistake.

To ensure that you receive a professional service that is regulated and offers the means of redress if you are not satisfied it is always best to use a qualified legal professional.

August 15, 2011

Wealth tax threshold to increase

The net value of an estate on which ISF (wealth tax) is payable has increased from €800,000 to €1,300,000. Between €1,300,000 and €3,000,000 the rate will be 0.25% on the global net wealth and over €3,000,000 will be taxed at 0.5% on the global net wealth.

If your net wealth is below €3,000,000 you will no longer be required to file a wealth tax return but will instead declare your wealth on your income tax return.

It may be beneficial for wealthy individuals to consider ways to ensure that their net wealth stays within the 0.25% bracket or €3,000,000 to avoid filing a wealth tax return.

SCI exemption abolished

To reduce their wealth tax bill, non-residents sometimes make use of an SCI to buy property in France and financing the purchase by a loan from the shareholder of the SCI. However, the proposed change now confirmed, means the value of shareholder loans will be disregarded when calculating the share value for wealth tax purposes meaning the full value of the property would be chargeable to wealth tax. The position regarding the deduction of bank and similar mortgages remains unaffected.

Wealthy individuals should review any shareholder loans to French property holding SCIs and may want to review generally the use of mortgages on French property to reduce their net wealth for wealth tax purposes.

Tax exemption to invest in UK

Consultation process to allow Non-Domiciled UK residents to invest money into the UK free of tax for the purpose of commercial investment has begun. Currently, there are no proposed limits to the amount of investment.

The consultation also sets out the Government’s intention to increase the annual charge for non-domiciled individuals who have been UK resident for 12 or more years out of the 14 years pay tax on a remittance basis. The new charge would see an increase for these individuals from £30,000 to £50,000.

The consultation will close on 9th September 2011.

It may be worth waiting a little while longer before investing in UK. It would also be worthwhile seeking expert advice to calculate the most advantageous options in your circumstances.

Exemption for legal fees on termination

An employee's legal costs on termination of employment when paid by the employer are generally exempt from income tax. The drafting of a new order has recently raised concern over this position. The new order stipulates that compromise agreements and costs awarded by tribunal will be exempt from income tax but fails to include agreements reached through other means such as via ACAS.

Although HMRC has confirmed verbally that such agreements will be covered by the order, no amendments have been made to the order and so in practice it may be difficult for those settling claims under COT3 agreements reached through ACAS conciliation to obtain the benefit of this tax exemption.

Employers should bear in mind the potential tax implications of reaching agreements with dismissed employees through ACAS.