Losing a Domicile of Choice

In the High Court case of Perdoni & Anor v Curati, Mr and Ms Perdoni claimed that their Uncle’s English will (they were sole beneficiaries) was not fully revoked by his subsequent Italian will.

It was agreed that the key point was whether Mr Curati was UK domiciled in 1994, when his Italian will was drawnup.

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If he was, his English will would be partly effective and Mr and Ms Perdoni would be entitled to the deceased’s English estate.

The deceased, Pierlugi Curati, resided in Italy until he was 28, at which point he moved to London, with his wife (a British citizen) where he owned a restaurant and later purchased a portfolio of properties in England and in Italy. However the centre of his business activities always remained in the UK along with the marital home.

It was contended that the deceased always had an intention to move back to Italy before his death and therefore had not acquired England as a domicile of choice.

The key point was whether he had established an intention to return to Italy “upon clearly foreseen and reasonably anticipated contingency” in 1994.

This flag is the Union Flag in the 3:5 ratio e...

(Photo credit: Wikipedia)

In 1992 Mrs Curati was diagnosed with cancer and she was cared for by the NHS in England. As the deceased was inseparable from his wife, from that time on there was no prospect that he would change his established pattern of life and decide to return to Italy until his wife had either recovered or died.

Mrs Curati never fully recovered from her cancer which meant that there could not have been a clear intention to return to Italy in 1994.

Therefore Mr Curati was held to have being UK domiciled at the time the Italian will was drawn and therefore the English will was partially effective.

HMRC Targets Electricians in New Disclosure

On 14 February 2012 HMRC launched a tax amnesty aimed at electricians called the Electricians’ Tax Safe Plan (ETSP). Initially around 50,000 individuals will be sent letters inviting them to report previously undisclosed earnings.

Individuals who disclose using the ESTP will only have to report undeclared income from the last six tax years and will suffer a reduced penalty of between 10% and 20% of the tax due.

To disclose using the ETSP, the individual must notify HMRC of their intention by 15 May 2012, with the deadline for finalising the disclosure and payment being 14 August 2012.

HMRC have warned that electricians who have undisclosed income and do not come forward may face criminal investigation and prosecution.

If you would like assistance in making a disclosure, Eaves and Co would be happy to assist.  Please call our Leeds office on 0113 2443502.

Late Payment Surcharges

The tribunal case of Sarah Cornes and HMRC considered whether there was reasonable excuse for late payment of income tax.

The appellant’s business was struggling and her husband had suffered through 3 employment terminations and ensuing personal problems.

The tax payer made a request for “time to pay” on 23 February 2011.  Because of difficulties in managing paperwork etc a time to pay arrangement was finally agreed on 2 June 2011.

The tribunal found that the taxpayer had been diligent and prudent, in attempting to agree a time to pay arrangement prior to the surcharge trigger date (28 February 2011). Therefore she had reasonable excuse and the surcharge was not to be applied.

Statutory Residence Test Delayed

It was announced in the Autumn budget report that the statutory residence test, due to come into effect in April 2012, has been delayed until April 2013.

When it is implemented the test will provide taxpayers with a greater degree of certainty regarding their tax residence status.

However even though it has not yet been implemented it is still worth bearing in mind. Particularly as the number of days an individual is present in the UK in prior years will determine the relevant criteria under the statutory residence test.

If you are going to be working abroad call our Leeds office on 0113 2443502 to understand your UK residence status, before you leave

Penalty Discharged

On 27 September 2010 a charity organisation was issued with a £400 late filing penalty in reference to its PAYE P35 for 2009/10 which was due on the 19 May 2010.

However the penalty charge was issued when the return was 5 months late and the taxpayer was not notified at any time before.

The taxpayer’s accountant requested a review of the penalty as he believed he had filed the P35 online on 16 May 2010.

The tribunal stated that it was not legally correct to state that, once an assessment or charge had been raised by HMRC, the onus is on the taxpayer to prove it is incorrect.

Consequently, it was for HMRC to prove – on the balance of probabilities – that the P35 had not been filed by 19 May 2010 and a penalty was due.

The tribunal went on to state that TMA 1970 s118 did not define reasonable excuse in a way that required exceptional circumstances and it should therefore be given its ordinary meaning.

The accountant honestly believed he had submitted the return on time.  The tribunal found him to be an honest and candid witness and counsel for HMRC were forced to agree that this might amount to reasonable excuse even though it was not exceptional.

The tribunal also stated there was no logical reason for the delay in sending out the penalty notices for four months.

The tribunal upheld the appeal against the penalty in full, adding that HMRC had ‘neither acted fairly nor in good conscience’.

 This case has a wide-ranging impact on excuses for late filing of returns.

The tribunal ruling goes directly against HMRC’s longstanding view and published guidance that reasonable excuse equates to exceptional circumstances outside the taxpayer’s control.

The tribunal’s view was that reasonable excuse should be given its ordinary meaning.

UK Residency under Scrutiny

The matter of UK residency is a common thread in the tax tribunal and courts over recent times.

The Gaines-Cooper case continues to be the main showpeice in relation to UK nationals leaving our shores.

However, professional advisors assisting overseas nationals coming to the UK should consider the case of Tuczka. Which has just been heard by the Upper Tribunal in favour of HMRC.

Tax residency remains a complex area and we will be glad to assist on 0113 2443502

IR35: Contractor Wins

HMRC assessed Elaine Richardson who worked via ECR Consulting Ltd for £50,000 under IR35.

The case went to tribunal where three tests were applied; mutuality of obligation, substitution and control to determine the nature of her working relationship.

In deliberating, the tribunal made the following observations about ECR:

  • It operated from a dedicated business area at her home
  • It has company a domain and website
  • It advertises its services and is a member of the Professional Contractors Group
  • There are retained reserves and invested in business development
  • Over the years ECR has taken on fixed price work for a variety of clients.

The tribunal judges concluded, “it is clear to us that ECR is a genuine business and therefore not a target of the IR35 legislation”.

From this case it is clear that IR35 is still being pursued by HMRC, and freelance arrangements must have a clear commercial trading rationale behind them.

If you have any queries about how IR35 applies to you or are thinking about going freelance, please get in touch on Leeds (0113 2443502).

Self Employed or Employed

 When deciding on whether an individual is employed or self-employed the Courts look at several ’employment indicators’.

These are used to gain an indication of an individual’s employment status.  They include the right to substitution, level of control, use of own equipment and several more.  

In a recent tribunal case it was contested as to whether a Doctor was self-employed or employed when undertaking practice work.  The tribunal found that applying these indicators proved to be inconclusive.

Both parties involved believed that the arrangement was one of self-employment and a contract was drawn up as such. The tribunal stated as the case was ‘borderline’ this should be taken into account. The taxpayers appeal was upheld and he was deemed to be self-employed.  

An individuals employment status is a complex area. If you would like advice with regard to your employment status  why not get in touch.

Pensions Relief Carry-forward

From 6 April 2011, the rules on receiving relief for pension contributions have been changed.  The new rules restrict the maximum annual allowance to £50,000 from £255,000 (subject to the limit of 100% of relevant earnings).

Whilst this may appear to be a significant reduction, for the majority of taxpayers it actually represents an increase from what could be contributed on the most tax efficient basis, due to the complex rules in place over the past couple of years.

An additional welcome change is that unused allowances from the three previous tax years will be available for “carry forward” to the year in question. 

Unused allowances in 2008/09, 2009/10 and 2010/11 will be available to carry forward into 2011/12 but on the assumption that the annual allowance was £50,000 in those tax years.  This will mean that those paying less than £50,000  in these years will have additional allowance to carry forward from prior years to 2011/12.

We recommend specific advice is taken as to the maximum relievable pension contribution level for 2011/12.

Eaves & Co Year End

Our financial year passed on 31 March and the 2010/11 year has been a successful one.

We have increased our fees significantly and have engaged a number of new good quality clients this year; as well as providing an excellent service to our existing client base.

Special thanks must go to our talented group of staff who have worked very hard and whose development we are very proud of.

We already have plans to develop our team and client base for the coming year, when again we will be providing robust, innovative and accessible tax advice to entrepreneurs and individuals alike.