so you sell business/property and dont want to pay any tax
Discussion
There are numerous schemes available for doing this but as with everything it all depends on your moral view point.
Some say why not, its my money, i have earned it and i have paid tax every year since day dot, others will say you have benefitted and the economy depends on people paying what is due.
The Piers Morgan programme on Marbella showed a Chinese guy who had sold his Pharmaceutical firm for a fair few million and who now lives in Marbella a has flat in Gibraltar and has therefore avoided paying CGT
I believe that the law changes in April and that they are closing some of the loop holes re the overseas house route
Its worth bearing in mind though that these schemes cost money and i am sure Eric Mc or another accountant will confirm that these schemes can be disallowed retrospectively even if your accountant has declared them under the disclosure scheme
Some say why not, its my money, i have earned it and i have paid tax every year since day dot, others will say you have benefitted and the economy depends on people paying what is due.
The Piers Morgan programme on Marbella showed a Chinese guy who had sold his Pharmaceutical firm for a fair few million and who now lives in Marbella a has flat in Gibraltar and has therefore avoided paying CGT
I believe that the law changes in April and that they are closing some of the loop holes re the overseas house route
Its worth bearing in mind though that these schemes cost money and i am sure Eric Mc or another accountant will confirm that these schemes can be disallowed retrospectively even if your accountant has declared them under the disclosure scheme
Mclovin said:
can you just do it like an mp and say this is my primary residence <the one you are selling> so i am not liable for cgt on it....
The Main Residence CGT exemption rules are open to everyone, not just MPs. However, you cannot just claim that another property is your Main Residence. You must show some evidence that you have lived there for at least some period of time.Edited by Eric Mc on Monday 18th January 23:38
Eventually found the answer curtesy of the sunday times
Accountants expect to see a rush of people moving to their foreign holiday homes for five years to beat capital gains tax on the sale of their British assets.
If you have a second property abroad and move there before you sell UK assets, such as a buy-to-let property or share portfolio, you could avoid CGT as long as you do not return for five years. Lucy Hardwick at Deloitte said: “The increase in the CGT rate to 28% is a tipping point for many individuals. Some will be looking to relocate to another country to mitigate rates.”
Here we answer your questions:
What is happening?
CGT, which went up from 18% to 28% for higher-rate taxpayers on June 23, applies to gains made on British investments such as second homes, shares and business assets. Those who have planned their retirement around selling such assets may consider moving abroad for a few years, said Deloitte — especially if they already have a second home overseas. By leaving the country and selling assets while abroad, you do not have to pay CGT to HM Revenue & Customs (HMRC), but you cannot return to Britain for five years or you will be charged retrospectively.
Do I have to pay CGT in the country I move to?
Yes, although some jurisdictions such as the Channel Islands, Holland and Switzerland do not charge CGT. Italy charges 12.5% and Canada 22%. Belgium used to be a very popular destination for emigrating entrepreneurs because you needed to stay there for only one year, but the Revenue clamped down on this in 2005 and the usual five-year rule applies.
Who qualifies for entrepreneurs’ relief?
The government announced that entrepreneurs will still be able to pay a reduced rate of CGT at 10% on the sale of qualifying business assets such as retail outlets or offices. You can benefit from the lower rate on up to £5m worth of gains within a lifetime — rather than £2m as was the case previously. You have to own at least 5% of the company and be either an employee or an executive to qualify. However, gains of more than £5m are charged at 28%. David Kilshaw at KPMG, the accountant, said the £5m lifetime limit was “woefully inadequate” for most serial entrepreneurs. He said: “Though £5m is adequate for the man on the street, most of them cannot benefit from entrepreneurs’ relief as they do not own 5% of a business.” He said leading entrepreneurs find even the new limit too restrictive.
Can I still be a resident of the UK?
No. You have to demonstrate that you have left the country and become a non-resident for five years. Hardwick said: “It is not just about becoming resident in a new country, it’s about satisfying HMRC that you have actually left the UK. “It can be hard to convince HMRC you have left the country if you still make regular visits to the UK, have family here or have significant assets here.” You may need to sell or let out your home in Britain, for example. You can make visits of up to 90 days a year on average over the course of four years.
Are there other ways to reduce CGT?
Many companies are turning into partnerships as this means the 5% rule does not apply if you want to benefit from entrepreneurs’ relief, according to KPMG. “We expect a decline in corporations and rise in partnerships,” said Kilshaw. However, with a partnership you have to pay income tax upfront. With a company, you pay income tax only when you withdraw money from the company as dividends.
Accountants expect to see a rush of people moving to their foreign holiday homes for five years to beat capital gains tax on the sale of their British assets.
If you have a second property abroad and move there before you sell UK assets, such as a buy-to-let property or share portfolio, you could avoid CGT as long as you do not return for five years. Lucy Hardwick at Deloitte said: “The increase in the CGT rate to 28% is a tipping point for many individuals. Some will be looking to relocate to another country to mitigate rates.”
Here we answer your questions:
What is happening?
CGT, which went up from 18% to 28% for higher-rate taxpayers on June 23, applies to gains made on British investments such as second homes, shares and business assets. Those who have planned their retirement around selling such assets may consider moving abroad for a few years, said Deloitte — especially if they already have a second home overseas. By leaving the country and selling assets while abroad, you do not have to pay CGT to HM Revenue & Customs (HMRC), but you cannot return to Britain for five years or you will be charged retrospectively.
Do I have to pay CGT in the country I move to?
Yes, although some jurisdictions such as the Channel Islands, Holland and Switzerland do not charge CGT. Italy charges 12.5% and Canada 22%. Belgium used to be a very popular destination for emigrating entrepreneurs because you needed to stay there for only one year, but the Revenue clamped down on this in 2005 and the usual five-year rule applies.
Who qualifies for entrepreneurs’ relief?
The government announced that entrepreneurs will still be able to pay a reduced rate of CGT at 10% on the sale of qualifying business assets such as retail outlets or offices. You can benefit from the lower rate on up to £5m worth of gains within a lifetime — rather than £2m as was the case previously. You have to own at least 5% of the company and be either an employee or an executive to qualify. However, gains of more than £5m are charged at 28%. David Kilshaw at KPMG, the accountant, said the £5m lifetime limit was “woefully inadequate” for most serial entrepreneurs. He said: “Though £5m is adequate for the man on the street, most of them cannot benefit from entrepreneurs’ relief as they do not own 5% of a business.” He said leading entrepreneurs find even the new limit too restrictive.
Can I still be a resident of the UK?
No. You have to demonstrate that you have left the country and become a non-resident for five years. Hardwick said: “It is not just about becoming resident in a new country, it’s about satisfying HMRC that you have actually left the UK. “It can be hard to convince HMRC you have left the country if you still make regular visits to the UK, have family here or have significant assets here.” You may need to sell or let out your home in Britain, for example. You can make visits of up to 90 days a year on average over the course of four years.
Are there other ways to reduce CGT?
Many companies are turning into partnerships as this means the 5% rule does not apply if you want to benefit from entrepreneurs’ relief, according to KPMG. “We expect a decline in corporations and rise in partnerships,” said Kilshaw. However, with a partnership you have to pay income tax upfront. With a company, you pay income tax only when you withdraw money from the company as dividends.
I would also speak to a good IFA that can help you with your tax affairs, most IFA's aren't capable of this kind of thing so you need to do some proper research. It is much more limited than it used to be but there are things you can legally do to mitigate your tax bill. As with most things the larger the amount you have to shelter the more efficient it is.
Yes, I agree - pay for UK Accountant with expat experience, and also, check the local country (destination) so you don't jump out of frying pan...
Generally, you do 'drop off the grid', and the 5 years is ball-park only, as HMRC take a flexible view, and therefore although you can visit UK for 91 days / year....the footprint in the UK needs to be very light, and no assets, bank accounts, etc that are visibly being used by you.
You can unload UK assets with no CGT, once you are legally offshore. Any UK income will be subject to UK tax return (hence ongoing need for UK Accountant), so move all assets offshore if you can.
Get good advise, stick to it....and if you do 'bend' the rules, then 11th commandment....DON'T GET CAUGHT !
Back to the pool now...
Generally, you do 'drop off the grid', and the 5 years is ball-park only, as HMRC take a flexible view, and therefore although you can visit UK for 91 days / year....the footprint in the UK needs to be very light, and no assets, bank accounts, etc that are visibly being used by you.
You can unload UK assets with no CGT, once you are legally offshore. Any UK income will be subject to UK tax return (hence ongoing need for UK Accountant), so move all assets offshore if you can.
Get good advise, stick to it....and if you do 'bend' the rules, then 11th commandment....DON'T GET CAUGHT !
Back to the pool now...
Thanks for the great answers.
I've found another article in the times again
Expats’ guide to lower tax
After the coalition's austerity budget, wealthy investors and entrepreneurs are looking farther afield to escape the Inland Revenue’s clutches
Alexandra Goss
Published: 11 July 2010
As UK tax hikes bite, many are considering emigrating (Cate Gillon/Marcos Welsh)Forget its wide green spaces and quality of life, New Zealand is now being touted as the latest tax haven following Britain’s austerity budget.
Immigration New Zealand says interest from entrepreneurs considering leaving Britain has increased noticeably since George Osborne’s budget last month, in which he announced an increase in capital gains tax (CGT) for higher-rate taxpayers from 18% to 28%. He also kept the top rate of income tax at 50% for those earning £150,000 or more, while the point at which people start paying 40% tax will drop from £43,875 to £42,375 from April.
Kiwis, in contrast, are set to benefit from the biggest reform of their tax system for 25 years. The top income tax rate will be reduced from 38% to 33% for those earning more than NZ$70,000 (£32,663) in October. Also, there is no headline CGT, although it can apply to some investments, and no inheritance tax or stamp duty on property transactions.
Richard Jarrett, at Westpac New Zealand, the financial services company, said: “Although New Zealand has always had special appeal for Brits because of its cultural similarities, forthcoming tax changes seem set to make it more attractive for wealthy individuals. The tax system is quite a lot simpler than the UK’s.”
Migrants moving to New Zealand benefit from concessions on overseas investment income — such as foreign dividends, interest and rents, but excluding foreign employment income — and pensions for the first four years of living there. This means they usually pay income tax only on New Zealand earnings.
To qualify, the new migrant must attain tax residence status, which involves having their permanent residence there and being in the country for more than 183 days in any rolling 12-month period. There is a points system for migrants, based on skills, which can make entry more difficult.
However, to attract foreign entrepreneurs, Immigration New Zealand has launched two investor visas that grant immediate residency for those looking to put money into the country. The Investor Plus visa has no age or business stipulations but requires an investment of NZ$10m over three years. Applicants must spend at least 73 days in each of their second and third years in New Zealand.
The Investor visa carries an age limit of 65 and requires migrants to have three years’ business experience, plus they must invest NZ$1.5m over four years, in addition to holding “settlement” funds (money held in a bank account, for example) of NZ$1m. Those applying for this second category must spend at least 146 days in their second and third years in New Zealand.
Alan Lamb, 49, a company director who has applied for the Investor visa, said: “With more than 30 years' experience in the furniture business, I hope to use my knowledge and energy to start a company in New Zealand and enjoy a new lifestyle at the same time. I also think it will be easier for my wife and I to achieve our goals working in a fast-growing economy with favourable tax laws, where the first language is the same as my own.”
Analysis by KPMG, the accountant, shows that Britain is now one of the most expensive of the big financial centres. For example, a married entrepreneur with two children who is resident and domiciled in Britain for tax purposes and earns £150,000 a year, would pay income tax today of £58,000.
Even though the government has extended entrepreneurs’ relief from £2m to £5m, on which you pay CGT of 10%, the sale of any larger business would land him with a big tax bill.
Suppose he then realised a capital gain of £10m. Of this, £5m would be subject to 10% tax, or £500,000. CGT on the other £5m would be at 28%, or £1.4m — so when added to the income tax, he faces a total tax bill of almost £1.96m, said KPMG.
Similarly, in France, he would pay £3m in capital gains and £50,000 in personal tax, giving a total of £3.05m. In Italy, he would pay £1.7m in CGT and £64,000 in tax, giving a total of £1.76m.
Be aware, however, that losing UK tax residence can be far from straightforward. David Kilshaw at KPMG said: “Recent court judgments, such as that of millionaire Robert Gaines-Cooper, who was found liable to pay UK tax despite being based in the Seychelles since 1976, have highlighted the importance of making a clean break with Britain. For most this means selling the house and taking their family life offshore.”
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We asked KPMG to compare income and CGT rates for our entrepreneur in different areas of the world.
New Zealand
There are four rates of personal income tax in New Zealand: 12.5% on earnings up to NZ$14,000, 21% between $14,001 and $48,000, 33% between $48,001 and $70,000 and 38% above $70,000. Tax cuts announced in the government’s May budget mean that from October 1 these rates will drop to 10.5%, 17.5%, 30% and 33% respectively.
The cuts are being balanced by a rise in the goods and services tax (GST) from 12.5% to 15%. Although this is still lower than the Vat rate in Britain, which will go up from 17.5% to 20% on January 4, it applies to most goods and services, with very few exemptions.
Also, from April 1, the New Zealand company tax rate will fall from 30% to 28%. Although this will still be higher than in Britain, where the main rate of corporation tax will be cut from 28% to 24% over the next four years and the rate for smaller companies now stands at 20%, New Zealand allows shareholders a tax credit for company tax paid.
A comparable entrepreneur who is resident in New Zealand would pay no tax on the £10m capital gain. His tax bill would be £50,000, which takes into account the rate decrease from October and includes social security of 1.4% on $106,473.
Christopher Groves at Withers, the international law firm, said: “New Zealand is looking like an interesting destination for some clients. The four-year tax holiday for new residents is attractive for individuals living on investment income.
“However, moving to New Zealand on an investor visa can require a significant investment to be made there and so is not for everyone. It is also very far from the UK. Otherwise, the Channel Islands and Switzerland remain popular.”
John Cantin, tax partner at KPMG New Zealand, added: “A point worth noting is that although recent changes are making New Zealand increasingly attractive, there remains a number of tax rules that apply to individual taxpayers that are complicated.”
Tax bill for someone earning £150,000: £50,000
Australia
Australia operates four bands of income tax, with a A$6,000 (£3,457) personal allowance on which you pay no tax. Thereafter, income up to A$37,000 is taxed at 15%; up to A$80,000 at 30%; and between A$80,001 and A$180,000 at 37%. Anyone earning more than A$180,000 pays tax at 45%.The Australian tax authorities levy CGT, but it is not treated as a separate tax, but rather a component of income tax. You are taxed on your net capital gain at the marginal rate.
However, temporary Australian tax residents who hold a temporary resident visa and do not have a spouse who is an Australian citizen are given CGT exemptions on the sale of certain assets. So, if our entrepreneur became a temporary tax resident of Australia and made a £10m gain on the sale of his UK business, he should be exempt from CGT.
Tax bill: £55,000
Channel Islands
The tax regime is straightforward in the Channel Islands. A flat 20% rate applies for income tax in both Jersey and Guernsey, and neither applies CGT. In Guernsey, the tax bill would be slightly lower — at about £32,000 — because of the £18,100 married couple’s allowance there.
Tax bill: £33,000
Switzerland
The destination of choice for hedge fund managers, Switzerland’s average personal top tax rate is half that in Britain.
There are four levels of tax — federal, cantonal, local and church (both Catholic and Protestant).
Income tax rates vary from canton to canton, and within cantons from community to community. For example, our entrepreneur earning £150,000 a year will pay £40,000 in income tax and social security in Zug, where the top rate of tax is 24%; £48,000 in Zurich; and £55,000 in Geneva, where the top rate is 44.5%, according to KPMG.
No CGT is levied on gains realised from the disposal of “movable assets”, which would include shares, but our entrepreneur would also be exempt from CGT on his £10m gain in these cities.
Wealth tax is levied only at cantonal and local levels and there is no gift or inheritance tax for transfers between spouses or from parents to their children. Tax on dividend income earned by those who have a substantial interest in a company (more than 10%) is lower there than in Britain, where it is 42.5%.
In Switzerland, such dividends are taxed at a minimum 40% discount on an individual’s personal tax rate. In Geneva, for example, if you pay 44.5% on income, you will pay 26.7% on dividend income. In Zug, the top rate is also 24%, although this is cut to 12% for business owners and managers.
The Swiss office of KPMG said: “If faced with the question of where to live and where to die, Switzerland is the answer.”
Tax bill: £40,000
I've found another article in the times again
Expats’ guide to lower tax
After the coalition's austerity budget, wealthy investors and entrepreneurs are looking farther afield to escape the Inland Revenue’s clutches
Alexandra Goss
Published: 11 July 2010
As UK tax hikes bite, many are considering emigrating (Cate Gillon/Marcos Welsh)Forget its wide green spaces and quality of life, New Zealand is now being touted as the latest tax haven following Britain’s austerity budget.
Immigration New Zealand says interest from entrepreneurs considering leaving Britain has increased noticeably since George Osborne’s budget last month, in which he announced an increase in capital gains tax (CGT) for higher-rate taxpayers from 18% to 28%. He also kept the top rate of income tax at 50% for those earning £150,000 or more, while the point at which people start paying 40% tax will drop from £43,875 to £42,375 from April.
Kiwis, in contrast, are set to benefit from the biggest reform of their tax system for 25 years. The top income tax rate will be reduced from 38% to 33% for those earning more than NZ$70,000 (£32,663) in October. Also, there is no headline CGT, although it can apply to some investments, and no inheritance tax or stamp duty on property transactions.
Richard Jarrett, at Westpac New Zealand, the financial services company, said: “Although New Zealand has always had special appeal for Brits because of its cultural similarities, forthcoming tax changes seem set to make it more attractive for wealthy individuals. The tax system is quite a lot simpler than the UK’s.”
Migrants moving to New Zealand benefit from concessions on overseas investment income — such as foreign dividends, interest and rents, but excluding foreign employment income — and pensions for the first four years of living there. This means they usually pay income tax only on New Zealand earnings.
To qualify, the new migrant must attain tax residence status, which involves having their permanent residence there and being in the country for more than 183 days in any rolling 12-month period. There is a points system for migrants, based on skills, which can make entry more difficult.
However, to attract foreign entrepreneurs, Immigration New Zealand has launched two investor visas that grant immediate residency for those looking to put money into the country. The Investor Plus visa has no age or business stipulations but requires an investment of NZ$10m over three years. Applicants must spend at least 73 days in each of their second and third years in New Zealand.
The Investor visa carries an age limit of 65 and requires migrants to have three years’ business experience, plus they must invest NZ$1.5m over four years, in addition to holding “settlement” funds (money held in a bank account, for example) of NZ$1m. Those applying for this second category must spend at least 146 days in their second and third years in New Zealand.
Alan Lamb, 49, a company director who has applied for the Investor visa, said: “With more than 30 years' experience in the furniture business, I hope to use my knowledge and energy to start a company in New Zealand and enjoy a new lifestyle at the same time. I also think it will be easier for my wife and I to achieve our goals working in a fast-growing economy with favourable tax laws, where the first language is the same as my own.”
Analysis by KPMG, the accountant, shows that Britain is now one of the most expensive of the big financial centres. For example, a married entrepreneur with two children who is resident and domiciled in Britain for tax purposes and earns £150,000 a year, would pay income tax today of £58,000.
Even though the government has extended entrepreneurs’ relief from £2m to £5m, on which you pay CGT of 10%, the sale of any larger business would land him with a big tax bill.
Suppose he then realised a capital gain of £10m. Of this, £5m would be subject to 10% tax, or £500,000. CGT on the other £5m would be at 28%, or £1.4m — so when added to the income tax, he faces a total tax bill of almost £1.96m, said KPMG.
Similarly, in France, he would pay £3m in capital gains and £50,000 in personal tax, giving a total of £3.05m. In Italy, he would pay £1.7m in CGT and £64,000 in tax, giving a total of £1.76m.
Be aware, however, that losing UK tax residence can be far from straightforward. David Kilshaw at KPMG said: “Recent court judgments, such as that of millionaire Robert Gaines-Cooper, who was found liable to pay UK tax despite being based in the Seychelles since 1976, have highlighted the importance of making a clean break with Britain. For most this means selling the house and taking their family life offshore.”
Previous
• 1
• 2
Show all
We asked KPMG to compare income and CGT rates for our entrepreneur in different areas of the world.
New Zealand
There are four rates of personal income tax in New Zealand: 12.5% on earnings up to NZ$14,000, 21% between $14,001 and $48,000, 33% between $48,001 and $70,000 and 38% above $70,000. Tax cuts announced in the government’s May budget mean that from October 1 these rates will drop to 10.5%, 17.5%, 30% and 33% respectively.
The cuts are being balanced by a rise in the goods and services tax (GST) from 12.5% to 15%. Although this is still lower than the Vat rate in Britain, which will go up from 17.5% to 20% on January 4, it applies to most goods and services, with very few exemptions.
Also, from April 1, the New Zealand company tax rate will fall from 30% to 28%. Although this will still be higher than in Britain, where the main rate of corporation tax will be cut from 28% to 24% over the next four years and the rate for smaller companies now stands at 20%, New Zealand allows shareholders a tax credit for company tax paid.
A comparable entrepreneur who is resident in New Zealand would pay no tax on the £10m capital gain. His tax bill would be £50,000, which takes into account the rate decrease from October and includes social security of 1.4% on $106,473.
Christopher Groves at Withers, the international law firm, said: “New Zealand is looking like an interesting destination for some clients. The four-year tax holiday for new residents is attractive for individuals living on investment income.
“However, moving to New Zealand on an investor visa can require a significant investment to be made there and so is not for everyone. It is also very far from the UK. Otherwise, the Channel Islands and Switzerland remain popular.”
John Cantin, tax partner at KPMG New Zealand, added: “A point worth noting is that although recent changes are making New Zealand increasingly attractive, there remains a number of tax rules that apply to individual taxpayers that are complicated.”
Tax bill for someone earning £150,000: £50,000
Australia
Australia operates four bands of income tax, with a A$6,000 (£3,457) personal allowance on which you pay no tax. Thereafter, income up to A$37,000 is taxed at 15%; up to A$80,000 at 30%; and between A$80,001 and A$180,000 at 37%. Anyone earning more than A$180,000 pays tax at 45%.The Australian tax authorities levy CGT, but it is not treated as a separate tax, but rather a component of income tax. You are taxed on your net capital gain at the marginal rate.
However, temporary Australian tax residents who hold a temporary resident visa and do not have a spouse who is an Australian citizen are given CGT exemptions on the sale of certain assets. So, if our entrepreneur became a temporary tax resident of Australia and made a £10m gain on the sale of his UK business, he should be exempt from CGT.
Tax bill: £55,000
Channel Islands
The tax regime is straightforward in the Channel Islands. A flat 20% rate applies for income tax in both Jersey and Guernsey, and neither applies CGT. In Guernsey, the tax bill would be slightly lower — at about £32,000 — because of the £18,100 married couple’s allowance there.
Tax bill: £33,000
Switzerland
The destination of choice for hedge fund managers, Switzerland’s average personal top tax rate is half that in Britain.
There are four levels of tax — federal, cantonal, local and church (both Catholic and Protestant).
Income tax rates vary from canton to canton, and within cantons from community to community. For example, our entrepreneur earning £150,000 a year will pay £40,000 in income tax and social security in Zug, where the top rate of tax is 24%; £48,000 in Zurich; and £55,000 in Geneva, where the top rate is 44.5%, according to KPMG.
No CGT is levied on gains realised from the disposal of “movable assets”, which would include shares, but our entrepreneur would also be exempt from CGT on his £10m gain in these cities.
Wealth tax is levied only at cantonal and local levels and there is no gift or inheritance tax for transfers between spouses or from parents to their children. Tax on dividend income earned by those who have a substantial interest in a company (more than 10%) is lower there than in Britain, where it is 42.5%.
In Switzerland, such dividends are taxed at a minimum 40% discount on an individual’s personal tax rate. In Geneva, for example, if you pay 44.5% on income, you will pay 26.7% on dividend income. In Zug, the top rate is also 24%, although this is cut to 12% for business owners and managers.
The Swiss office of KPMG said: “If faced with the question of where to live and where to die, Switzerland is the answer.”
Tax bill: £40,000
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