Month: July 2017

Dividend Income from UK companies are tax free for non-residents

Suppose a shareholder is resident in Dubai a tax free country and a UK company pays him/her a dividend.

The whole dividend amount is tax free.

 

HMRC link: https://www.gov.uk/hmrc-internal-manuals/savings-and-investment-manual/saim1170

HMRC Help-sheet HS300 is also helpful.
https://www.gov.uk/government/publications/non-residents-and-investment-income-hs300-self-assessment-helpsheet/hs300-non-residents-and-investment-income-2015

 

Another good article on taxation.co.uk https://www.taxation.co.uk/Articles/2016/05/31/334836/readers-forum-barnstorming

 

Taxation in action: https://www.theguardian.com/business/2005/oct/21/executivesalaries.executivepay

 

 

UK Incorporated company always tax resident and file a tax return ?

As per Corporation Act 2009 section 14 any company incorporated in the UK is normally classified as UK resident company and thus subject to UK corporation tax and has to file a Tax return.

HMRC guidance clearly states it, see link below:
https://www.gov.uk/hmrc-internal-manuals/international-manual/intm120030

For background on Company residence see HMRC international manual, link below:
https://www.gov.uk/hmrc-internal-manuals/international-manual/intm120000

Thus the company needs to file tax return here in the UK.

If the company is also liable to taxation in another country as well example Norway the company will need to file tax return in Norway and get credit for tax paid in the UK under Article 25 of UK-Norway DTA. 

`One off` increase in VAT turnover

In case turnover increases as a `one off` and the business does not wish to register for VAT.

We have to write to the HMRC with evidence to convince them that turnover will not go over £83k (current de-registration threshold) in next 12 months.
HMRC Link below (see bottom of the page):
https://www.gov.uk/vat-registration/when-to-register

Primary legislation (see Clause 3):
http://www.legislation.gov.uk/ukpga/1994/23/schedule/1

Dormant Company

Dormant according to Companies House

Your company is called dormant by Companies House if it’s had no ‘significant’ transactions in the financial year.
Significant transactions don’t include:

  • filing fees paid to Companies House
  • penalties for filing the accounts late
  • money paid for shares when the company was incorporated
  • More information can be found here.

Dormant for Corporation Tax purposes

HMRC views a dormant company as a company that’s not active, not liable for Corporation Tax or not within the charge to Corporation Tax. More information can be found here.

Buy to let – Lease premium

Client had a leasehold residential buy to let property. He paid a hefty premium to extend its lease term by another 70 years.

The question was whether we should treat this expense as revenue or capital.

If we took it as revenue expenses, this could be immediately deducted from the rental income and save tax immediately.

If we took it as capital expense, we will need to wait till the property is sold before we can use these expenses as a deductible expense.

Common sense guides us that any expense done to enhance the value of the property is a capital expense but in tax world many times common sense and tax laws are divergent thus we need to clarify it with a credible source.

HMRC manuals were not easily revealing the answer thus an open search on google took us to a webportal which confirmed our understanding i.e. it’s a capital expense and pointed out the HMRC manual part.

Please read the link below:
 https://www.property-tax-portal.co.uk/taxquestion93.shtml

HMRC Manual reference CG71401; link
 https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg71401

 I will suggest also read CG71400: Introduction – which give a bit of background; link
 https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg71400