Well it is that time of year again and it was tempting to see if I could write a piece that made no reference whatsoever to the festive season! But my plans have been spoiled in the last couple of weeks by an early Christmas present or two.
The first was the court ruling on the issue of residence (and domicile) for Robert Gaines-Cooper and the second was a research paper from the Institute of Public Policy Research. Between them, they have combined to create an environment for sales of offshore investments which will see the UK market continue to enjoy phenomenal growth in 2007.
The court case centred on the rules used for determining residence for tax purposes.
Mr Gaines-Cooper had been making visits back to the UK on a regular basis, but believed he had kept within the 90 day average of visits over a four-year period. In calculating his number of days, he had excluded his day of arrival and day of departure – this meant he could, for example, arrive in the UK on a Monday morning and leave on the Wednesday evening and only register a one-day visit.
Whilst it has been Revenue practice to allow for these days to be excluded, they are concerned that the system is being abused. They challenged successfully on the grounds that there were other factors that pointed to residence, including residence of his wife and son, memberships of associations and clubs and so on and that the Taxes Act does not define test for residence.
Having lost the case, Mr Gaines-Cooper faces UK tax liabilities which had he owned an offshore bond would only have been crystallised had a chargeable event occurred – with other forms of assets (stocks, shares, deposits) he would be liable to income and gains tax for the period of his residence.
The Institute of Public Policy Research then last week revealed findings suggesting over 1 in 10 UK nationals now live abroad. This is a massive figure and represents some 5.5 million people. Many of them will be looking to offshore bonds as a suitable vehicle for some of their investments. Particularly those who intend to travel back to the UK occasionally and who wish to avoid the situation of having their residence queried by HMRC.
So thank you to Santa for the early Christmas present, which should make 2007 even more successful than 2006!
Richard Leeson is international relationship manager at Prudential.
The views expressed are those of the author and not those of the company he represents.IFAonline
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