Three things you should know about tax
Employers’ Pension Contributions
The rules regarding tax relief on employer pension contributions in particular for owner/manager businesses have, since A-Day, been somewhat clouded by the Revenue’s interpretation of the wholly and exclusive rules. The tax planning industry concern has been in connection with the Revenue’s approach with regard to the commerciality of an individual’s total remuneration package.
Thankfully, a recent addition to Revenue & Customs’ Manual provides some extra clarity and states “where the controlling director is also the person whose work generates the company’s income then the level of the remuneration package is a commercial decision and it is unlikely that there will be a non-business purpose for the level of the remuneration package”.
So effectively, the commercial value of a controlling director, in remuneration terms, is deemed to be inextricably linked to the success/profitability of the company assuming that their input is pivotal to that success. Accordingly, full tax relief should be granted on pension contributions up to the annual allowance of £225,000.
Offshore Disclosure Facility
The Revenue’s deadline approaches for the so-called tax amnesty for those who have income arising from offshore accounts for which no UK tax has been declared or paid.
The Revenue’s aim has been to get the majority who have avoided paying UK tax to accept the inevitable with the carrot of a fixed 10% penalty.
(Article continues below)Advertisement
The intention to disclose needs to be notified to the Revenue by the 22nd June 2007, a full disclosure and payment of taxes due, to include interest and the 10% penalty, must be made by the 26th November 2007.
With the Revenue having obtained details of offshore account holders, one can expect investigations to commence shortly after the 22nd June for those who have not fully disclosed. In particular, it is rumoured that the Revenue intends to name and shame high profile celebrities.
Offshore Investment Bonds
For those looking to defer or mitigate tax legitimately is through an investment in an offshore investment bond. This can include a wide ranging investment strategy from cash deposits, fixed deposits, guaranteed products or a full range of investment collectives to include exchange traded funds. This legitimate long-term deferral can add substantial benefits to an investor’s portfolio for a minimal cost.
By John Robson & Andrew Selsby at RH Asset Management Limited, as published in the Onassis Newsletter, a fortnightly newsletter that gives insight into the investment markets.
For more from RHAM, visit http://www.rhasset.co.uk/
