The Heroes Earning Assistance and Relief Tax (HEART) Act

Non US citizens applying for a US passport/green card need to be put on notice that the HEART Act will impose a US exit tax exposure when and if they give up their green card/US citizenship.

A detailed summary of the proposed legislation can be found here:

In essence this article tells us that when the proposed legislation described is signed into law by George Bush, citizens AND green card holders will be exposed to a US capital gains tax exit charge to the extent of their accrued gains on their world-wide assets if/when they give up their US citizenship/green card.

Charities – reclaiming tax from HMRC

On 10th June 2008 HMRC published questions and answers to help charities reclaim tax due on donations received. The questions and answers are particularly useful as they address the compliance the charity needs to observe and the forms they need to complete.

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New HMRC guidelines – transfer pricing enquiries

On 10 June 2008, HMRC published new guidelines on the conduct of transfer pricing enquiries under the UK’s current applicable law at Schedule 28AA ICTA 1988. The new guidelines will also apply where similar principles are used in determining the attribution of profit to a permanent establishment but they will not apply to the application of Schedule 28AA to the deductibility of interest in thin capitalisation cases except where the issue is considered for the first time in the context of a formal enquiry into a return.

US/UK marriages and civil partnerships

Both the US and the UK have tax rules whch limit what a domiciled/citizen spouse or, in the UK, a civil partner, can gift free of inheritance tax (IHT) /estate and gift tax to their non domiciled/non citizen spouse or civil partner.

In the UK the limitation is currently £367,000 and in the US, estate and gift tax issues arise once the US citizen has given away more than $2m, whether to his non-citizen spouse or a third party. These thresholds can unwittingly be broken when real estate is put in joint names or cash or securities are held jointly by spouses/civil partners.

New VAT forms – option to tax land and buildings

New HMRC guidance and forms take effect on 1 June 2008 for VAT in respect of options to tax land and buildings

The VAT treatment of property transactions is a highly complex area of VAT law.

New Notice 742A explains to taxpayers the effect of a VAT option to tax a proposed development or piece of land and will help taxpayers decide whether to exercise that option. In very general terms making an election obliges the landlord to charge VAT on all supplies arising from the opted land and allows the landlord to recover all input VAT arising from the opted land. This is particularly important if the landlord is developing the land and incurs input VAT on his development costs.

New notice 742A in addition tells taxpayers whether they need permission from HMRC before they can opt to tax a proposed development or piece of land, and how to notify HMRC of their decision. Prior to 1 June 2008, the option to tax was referred to as the election to waive exemption. From 1 June 2008, it is referred to by HMRC as the option to tax.

The new Notice 742A can be found here.

Taxpayers should note that with effect from 1st June 2008 HMRC has issued new forms relevant to the option to tax. These are as follows. New notice 742A has relevant information on each form:

Notification of an option to tax
Opting to tax land and buildings

http://www.hmrc.gov.uk/forms/vat1614a.pdf

Opting to tax land and buildings
Ceasing to be a relevant associate
(This is relevant where a member of a VAT group is for example sold and ceases to be associated with the relevant land.)

http://www.hmrc.gov.uk/forms/vat1614b.pdf

Opting to tax land and buildings
Revoking an option to tax within six months (the ‘cooling off’ period)

http://www.hmrc.gov.uk/forms/vat1614c.pdf

Certificate to disapply the option to tax:
Buildings to be converted into dwellings etc.

http://www.hmrc.gov.uk/forms/vat1614d.pdf

Opting to tax land and buildings
Notification of a real estate election

http://www.hmrc.gov.uk/forms/vat1614e.pdf

Opting to tax land and buildings
New buildings – exclusion from an option to tax

http://www.hmrc.gov.uk/forms/vat1614f.pdf

Certificate to disapply the option to tax:
Land sold to Housing Associations

http://www.hmrc.gov.uk/forms/vat1614g.pdf

Opting to tax land and buildings
Application for permission to opt

http://www.hmrc.gov.uk/forms/vat1614h.pdf

Opting to tax land and buildings
Revoking an option to tax after 20 years

http://www.hmrc.gov.uk/forms/vat1614j.pdf

Please contact Robert Schon if you want help with these forms or their implications.

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Tax relief on gifts to charity

Introduction

This note explains how you can get income tax and capital gains tax relief on gifts to charity of land, buildings, shares and securities.

Companies can get corporation tax relief for gifts to charity for the same types of investment including relief from corporation tax on capital gains on gifts to charity of shares, securities and other assets.

Trusts and Wills after the Finance Act 2006

Introduction

The Finance Act 2006 introduced significant changes in the UK’s tax regime for trusts. It also changed radically the way parents of minor children may want to structure their wills. The purpose of this note is to highlight the relevant changes so that if they apply to you, you can take informed and timely action.

In practice the changes are most likely to apply to:

(a) existing accumulation and maintenance trusts,

(b) some existing wills – even if the testator is still alive; and

(c) parents and grandparents who may want to leave assets to children or grandchildren at an age older than 18.