Rachel Sestini, managing director of Sestini & Co, writes on why conservative planning is the firm’s ethos in a world where even those who follow legitimate tax rules are vilified.
The government’s ongoing emphasis on collecting tax in new and unpredictable ways continues to impact on tax planning with the vilification of many who carefully follow tax rules to legally pay the minimum amount of tax.
We’ve seen changes to non-dom rules, offshore trust taxation and property taxation… and sensationalist reporting around David Cameron’s offshore income and around Richard Branson’s decision to live in the British Virgin Islands, not to mention the ‘Panama papers’ leak from law firm Mossack Fonseca.
Richard Branson, for example, not only lives in Necker Island but has redeveloped it since purchase in 1979, from an uninhabited, snake-infested island into a luxury resort; you can book the island from $78,000 per night. He moved his residence from the UK to the island in 2006 and has stated that he focuses 90 per cent of his time on not-for-profit initiatives, donating the income from them to charity.
I’m not sure anyone knows the total amount of corporation tax his companies and those he has invested in, supported and mentored have paid over the years, both in the UK and elsewhere. Nor the total PAYE and NIC for all his employees. Nor the total paid into pensions (which may therefore potentially produce savings on tax credits in the future). I could go on – but a lot of people would stop reading if I do.
At Sestini & Co we’re known for being rather conservative when it comes to tax planning, preferring that any planning undertaken is sensible, in context, sustainable and defensible. However we also believe that everyone is entitled to the deductions and reliefs set out in the taxes acts.
The summer 2015 Budget saw stricter rules mooted around classification of people who count as not domiciled in the UK for tax purposes (‘non-doms’). The Finance Bill 2016 was approved in September, meaning that:
- Long-term residents of the UK will no longer be able to be ‘non-doms’ for tax purposes
- Individuals born in the UK and UK domiciled at birth will not be able to claim they are non-doms while they are living in the UK
- There are likely to be different tax rules depending on whether you were born in the UK but subsequently left, are classed as ‘long term resident’, or are UK domiciled under general law
- If you’re deemed domiciled, that will apply for the purposes of income tax and capital gains tax, as well as inheritance tax
- From April 2017 inheritance tax will be charged on all UK residential property, including property held indirectly by non-doms through an offshore company or trust.
Another set of sweeping changes to the taxation of non-doms as well as changes to property taxation means that everyone will need to review their current arrangements. If you’d like to discuss tax planning, your residence status or how the changes might affect you, visit www.sestiniandco.co.uk/spears, contact us at firstname.lastname@example.org or call us on 01761 241 861.