Offshore Investing Budget 2010
Offshore Tax Evasion
New measures for income and capital gains tax will mean increasing the sanctions available to HMRC for tackling offshore non-compliance. Building on the existing behaviour-based penalty structure, increased penalties will be levied on persons using a jurisdiction that does not automatically share tax information with the UK.
Where a jurisdiction only exchanges information with HMRC on request, inaccuracies arising offshore will be subject to penalties at 1.5 times the existing rate.
Where a jurisdiction shares no information with HMRC, penalties will be at twice the current rate.
This means that deliberate failures to report income or gains from the most opaque tax jurisdictions could be met with penalties of up to 200% of the tax.
Controlled Foreign Companies - Reform
The controlled foreign company (CFC) regime provides anti-avoidance rules which protect the UK corporation tax base from erosion. The new CFC rules to be introduced as a consequence of the reform process will be targeted on artificial diversion of UK profit and not on taxing profits that are genuinely earned in overseas subsidiaries. Following the publication of a discussion document in January 2010, a consultation period is running to 20th April 2010. The intention is to introduce the new CFC regime in FB2011.
Tax transparent fund
The Government announced that it intends to work with industry to develop a tax transparent fund vehicle and will hold a formal consultation, with a view to legislating in Finance Bill 2011. No details are known yet but we suggest an investment vehicle attractive to non-UK resident investors investing in UK.