International tax issues and international travel have been the flavour of the month for me - happy days! I cannot emphasise enough that if there is an international dimension to your personal, business or corporate financial affairs, then you should be very aware that times are changing and the aggressiveness of tax authorities, certainly across the UK and EU, is on the up. Period.
The tax agenda at our annual UHY International Tax Conference which took place in Marbella early May was packed with cross-border tax issues - some positive and others less so.
Personal tax changes
Abandonment of UK tax domicile rules
The abandonment of the UK tax domicile rules are projected for 6 April 2025. We are in a particularly perilous interregnum now that dissolution of Parliament has been announced. Will the Tories follow through, or will Labour make it worse? Be aware that you cannot necessarily put off decisions until next year.
Consider a client who has been in the UK for 9 years, and 2024/25 will be his tenth unless he attends to his travel and UK residency (including day-counting) now. If you don’t know why 10 years is significant, then find out!
Considering Spain for tax benefits?
Is Spain on your agenda, maybe in conjunction with the forthcoming changes to domicile? I hadn’t quite appreciated how compelling the Spanish impatriate tax facility, the legacy of the Beckham tax ruling and then the possibility of a 1% IHT charge in Andalucia is! This is even more attractive now, as Portugal closes their once attractive Non-Habitual Tax Resident facility.
Corporate tax considerations
Transferring intellectual property abroad
Back home, and within a week, a 'scary' international tax issue crossed my desk. Do you, or your business, own intellectual property, registered or not? Consider this salutary tale. For the second time in 18 months, I hear, second hand and after the event, of an ill-conceived transfer of a UK business overseas. The first one was instigated in a “fit of pique” post-Brexit.
“Yes”, Brexit for many has been a real, expensive pain, and “yes” the solutions also often seem expensive. However, the wise solution is unlikely to be simply abandoning the UK business and setting up, say, in Germany. But of course, with so much business online, this might be tempting and eminently do-able. Think it through.
Your thought process may have clarity around the VAT and customs warehousing type implications of emigration. But you may be transferring a very valuable intangible asset (for example customer lists) across a border. Five years ago, certainly within the EU, this was rarely a problem. We were all in the EU; tax reliefs abounded and smoothed the way. But to make the transfer after we have left the EU means no such relief and possibly hefty tax charges.
Understanding the tax implications
How much? Simply work out the value of the intangible (in fact, no easy matter), establish the tax base cost (usually negligible, do you know the rules for fungibles?), and the resulting profit is subject to, typically, corporation tax, at 25%. Ouch! With tax advice, you might get a matching, probably deferred CT deduction in the new company/country, but it’s fraught with complexity. Be warned.
The next step
This insight was written by David Jones, tax director at UHY Ross Brooke Abingdon, emphasising the importance of careful planning when dealing with international tax matters to avoid costly mistakes. If you have any further enquiries regarding international tax, please contact David on d.jones@uhy-rossbrooke.com, or your usual UHY adviser.
