Extras

Question 1

Remittance Basis

Relevant Persons

Exemptions

Annual Charge

Paid

Answer 1

A ‘relevant person’ is:
• the taxpayer, their spouse or civil partner, and their children or grandchildren, aged under 18;
• a person with whom the taxpayer is living together as a couple; or
• certain companies and settlements from which any individual relevant person can benefit.

There are a few exemptions from the rules defining remittances of property purchased out of foreign income. They include:
• Personal effects.
• Assets costing less than £1,000.
• Assets brought into the UK for repair.
• Assets in the UK for a total period of less than 275 days.
• Works of art brought into the UK for public display.
• Income and gains that are remitted to the UK for the purpose of commercial investment in a qualifying company. The company can either be unlisted, or listed on an exchange regulated market such as AIM. It must be trading commercially, preparing to do so or investing in trading companies. Trading includes property letting. The investment must be made within 45 days of the remittance.
•The charge does not apply where unremitted foreign income and gains are less than £2,000 for the tax year.

The annual tax charge is:
• £30,000 for individuals who have been resident in the UK for at least seven out of the previous nine tax years; and
• £60,000 for individuals who have been resident in the UK for at least 12 out of the previous 14 tax years.

• The charge is paid through the self assessment system.

Question 2

HMRC Fines for late payments

Answer 2

• Taxpayers are automatically charged interest and penalties on late payments and underpayments.
• A 5% penalty is levied on any tax remaining unpaid more than 30 days after the balancing payment is due. If tax remains unpaid after a further five months then another 5% penalty is charged, and again where tax remains unpaid after a further six months (i.e. eleven months after the initial penalty date).

• There is a fixed penalty of £100 for any return not submitted by 31 January.
– If a return is more than three months late, a £10 daily penalty will be charged for a maximum of 90 days. These penalties are cumulative and payable even if there is no tax outstanding at the return due date.
– If a return is more than six months late, there will be a penalty of the higher of £300 and 5% of the tax outstanding, with another similar penalty where a return is more than twelve months late.
– At the twelve-month date, a higher percentage will be charged if the failure to submit the return is deliberate. Typically, where a return is more than twelve months late, the total minimum penalties will amount to £1,600 (£100 + (£10 × 90) + £300 + £300).
– HMRC has recently taken a more lenient stance towards the imposition of the initial £100 late filing penalty, with appeals being accepted without further investigation where taxpayers have a reasonable excuse for their late filing.

Question 3

Business asset disposal relief

Answer 3

Business asset disposal relief can be claimed when an individual disposes of a business or a part of a business.
• The relief covers the first £1 million of qualifying gains that a person makes during their lifetime.
• Gains that qualify for business asset disposal relief are taxed at a reduced rate of 10%.
• Where the £1m lifetime limit is exceeded, those gains in excess of the limit are subject to the normal rates of CGT.
• In determining the rate at which an individual is charged to CGT, those gains that qualify for business asset disposal relief are set against any unused basic rate band before non- qualifying gains.
Assets must have been owned for two years before the date of disposal in order to qualify for relief.
• Business asset disposal relief is available for:
– a disposal of the whole or part of a business run as a sole trader. Relief is only available in respect of chargeable gains arising from the disposal of assets in use for the purpose of the business. This excludes chargeable gains arising from investments; and
– the disposal of shares in a trading company where an individual meets a 5% shareholding test and is also an employee or director of the company.