The Register of Overseas Entities and the impact on property transactions
13 Feb 2023
Trust structures holding UK real estate - an update on the Register of Overseas Entities and reporting requirements
18 Jan 2023
The International Tax Round Winter 2022
06 Dec 2022
Worldwide Disclosure Facility (WDF): HMRC promising 'many more' tax investigations
22 Sep 2022
Statutory Residence Test (“SRT”): Exceptional circumstances
06 Sep 2022
Welcome to the Spring edition of The International Tax Round! In this edition we provide updates on ATED, Making Tax Digital and the new reporting rules for online sellers. We also bring you insights into Spain. Firstly, on the new Visa introduced for remote workers and secondly, an update on real estate investments by, our XLNC Partners, Planartús.
In our world, the start of a year is never a calm state of affairs. But the kick off to 2023 was certainly brimming with more activity than usual.
Along with the ever-frantic scramble to complete tax returns by 31st January, we faced the added pressure to register overseas entities owing to the new legislation. As we always do, we buckled up, put the pedal to the metal and got it done.
Following this laborious sprint, and in somewhat perfect timing, I set off to South Africa for my first business trip of the year. If you know me, you’ll know this is a country close to my heart – my home away from home, I often call it. The first week in Cape Town whizzed meeting existing and prospective clients along with business introducers. The buzz and inspiration from all of these interactions was a timely reminder of the importance of connecting – there is just nothing quite like it.
I shifted to the winelands for my second week of meetings, and I write this note as I gaze at the lush green and the gentle rise and fall of the mountains which seem to watch everything. I try my best to soak in the still beauty – if only I could bottle it up.
Verging away from the positivity, there are some very real struggles currently being experienced in South Africa. Whilst South Africans are no strangers to power outages (locally referred to as loadshedding), the situation worsened significantly in 2022.
It comes as no surprise then that in the South African Budget statement, rooftop solar power incentives both for business and individuals form the most significant tax announcement. Quite literally, many are feeling in the dark with a palpably low sense of optimism as the energy crisis deepens, but there’s hope that these incentives will provide some light.
Shifting attention back homewards, the Chancellor will deliver his first Spring Budget next week – watch out for our highlights which will be published shortly after the budget has been delivered.
Speaking of budgets, and as I wrap up what has been a wonderful few weeks in my spirit land, I urged myself to be sensible and resist the temptation of purchasing wine to take back. But with the ability to bag a beautiful Pinotage at £15, I feel I simply cannot be blamed!
In this edition, I'm pleased to bring you the latest information on:
- ATED valuation update – is your company now liable?
- HMRC again delays the modernisation of Income Tax
- Spain – New attractive Visa introduced for remote workers
- New reporting rules for online selling platforms to be introduced from 2025
- Non-dom status - is it here to stay?
- More profitable real estate and higher taxes in Spain, by Planartús
ATED valuation update – is your company now liable?
Every year, Non-Natural-Persons (NNP) who own UK residential property must submit returns for the Annual Tax on Enveloped Dwellings (ATED). The ATED was introduced by George Osbourne in 2012 and was only applicable to companies that held property valued at more than £2,000,000. This threshold has since tumbled to £500,000.
The value that is used for the ATED returns for the past five years has been static at the value as at 1 April 2017 (or date of purchase if bought later), however the upcoming 23/24 ATED returns will have their values based on the valuation as at 1 April 2022.
This update in valuation may bring a huge number of companies into the scope of the ATED, given that the average cost of a house in London exceeds £500,000 according to HMRC. There are numerous reliefs that can be claimed against the ATED charge that range from £4,150 all the way up to £269,450 depending on the value of the property. Even if relief is claimed, an ATED return must still be submitted and the appropriate relief claimed accordingly.
If you believe your property holding entity may now fall into the scope of the ATED, please contact firstname.lastname@example.org and we will assist with any compliance or advisory issues you may have.
HMRC again delays the modernisation of Income Tax
The introduction of Making Tax Digital (MTD) for Income Tax has again been delayed from April 2024 to April 2026.
In December 2022, HMRC announced that the long-awaited move to make landlords (and the self-employed) report their income quarterly has been pushed back. Several updates have been made to the criteria for the mandatory reporting rules.
The new threshold for reporting has been increased from £10,000 gross rent all the way up to £50,000, though this will drop down to £30,000 from April 2027. This change has meant a significant number of taxpayers will not be subject to the requirements.
The delay to 2026 means that (if it does happen) it will have taken over a decade to implement this aspect of tax modernisation since it was announced in 2015.
Spain – New attractive Visa introduced for remote workers
The government of Spain, under Pedro Sanchez, has introduced a new type of working Visa for Digital Nomads which offers tax advantages and a degree of permanency.
The new visa is a residence permit that enables non-EU citizens to work remotely from Spain either for a company or as a freelancer and can be extended up to five years. This visa also allows you to move throughout the EU, an attractive option for non-EU citizens.
Regarding the tax advantages, this new change brings in similar rules to the UK non-dom status which is applicable to income and gains from abroad. The main difference between the two countries non-dom regime, is that, it is not considered a taxable event when foreign income is remitted to Spain. The rate of tax levied on income is a flat rate of 24%.
New reporting rules for online selling platforms to be introduced from 2025
The Organisation for Economic Co-operation and Development (OECD) has announced that 28 jurisdictions have signed the multilateral competent authority agreement (MCAA) for the automatic exchange of information.
Broadly speaking, this agreement will allow any jurisdiction to exchange information on income earned by online platforms from the sale of goods and services from their platforms. This sweeping move will mean that taxpayers and governments will be able to more accurately report on their profits and pay the correct amount of tax in the correct jurisdictions.
The implementation of these rules in the UK was set to start in January 2024 but has now been pushed back a year to January 2025. Watch this space!
Non-dom status - is it here to stay?
Last year we wrote about the Non-Domiciled status and what it is and its implications (read the full article here).
This topic has been in the public domain recently with Rishi Sunak’s wife Akshata Murthy coming under the spotlight for her non-dom status.
On 31 January 2023, the Labour party put forward a motion calling for the analysis of the impact of abolishing the non-dom status. According to the Shadow Financial Secretary to the Treasury this status costs the UK government £3.2 billion a year in tax revenue.
Many Conservative MPs defended the status which allows non-domiciled individuals to only pay tax on their UK sourced income and gains and any remitted foreign income and gains, and the motion was defeated by over 70 votes.
Labour has pledged to end the non-dom status if they gain power in the next election which brings up whether many non-domiciled individuals would remain in the U.K or leave to different jurisdictions, which would lead to flight of capital investment here in the UK. With the current political climate and recent polls, the future of the non-dom status remains uncertain and this is certainly a topic to watch.
VOICES FROM XLNC - OUR INTERNATIONAL ALLIANCE
More profitable real estate and higher taxes in Spain
More and more foreign investors are placing their trust in the Spanish real estate sector because of the returns it generates.
This interest placed Spain as the main European destination for real estate investment in 2022, according to a report by the international consultancy Knight Frank.
There are several reasons that lead to investment:
- A highly appreciated climate
- A competitive price
- Attracted by the sea and its lifestyle
However, taxation has been increased for high-net-worth property holders because of approval of the new Tax on Large Fortunes (additional to the preexisting Wealth Tax). Further information can be found in Planartús' article here.
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