At this more festive time of year, even your friendly local tax practitioner tends to look up from the books and take stock of the world. To view the world from one of the oldest known professions means that there is a vast pool of experience and anecdotes upon which to draw. Tax has been immortalized in Egyptian hieroglyphics (one of the first pieces to be translated concerned a tax exemption), within the Bible (St Matthew was a tax collector at Capernaum before becoming an Apostle) and within song (most famously “The Tax Man” by the Beatles).
Tax laws throughout the world are rewritten and amended with alarming regularity to try to meet the needs of those in power, growing ever more complex each time. International treaties are needed to assist cross border transactions and ensure tax is not lost in this increasingly multinational world in which we live. The UK currently has the most international tax treaties in force (with around 120 countries) and in 2008 its tax code became the longest in the world, having overtaken India who had held the title in 2006. For the sake of balanced reporting, The Maldives probably has the shortest tax legislation having neither income, sales, property or capital gains taxes. Instead it receives most of the funds it needs by levying a flat fee for corporate entities to base themselves there, an approach that is also taken by other so-called tax havens.
Modern technology has been developed extensively to aid the taxman. Computer programs at HMRC link the clients of property letting companies with the Tax Returns of the owners to ensure that rental income is being declared….and taxed. They also receive information from the banks, DVLA, and the Land Registry. It is a brave new computerized world that tax offices around the globe are embracing. In Argentina, the tax office recently deployed remote drone aircraft and “found” over 200 mansions and 100 swimming pools that they didn’t know about – and certainly hadn’t taxed! And in the land of the Free, the IRS can now prevent you leaving (on a jet plane) if you owe it money.
Many would say that the IRS has been the bane of our lives over the past few years – even here in the UK. In common with many governments, the IRS has been trying to collect arrears and has launched a program to find every American who, if away from the USA homeland, had typically developed a rather relaxed approach to filing their US Tax Returns. But it was the manner that the IRS went about it that caused shockwaves around the world. The IRS defines an American as anyone born in the USA, born on US soil (potentially including US airbases) or born of an American parent (think of the US servicemen over here during WWII – or Bill Clinton during the 60s…). So whilst all Americans living here must nevertheless file US Returns, there are differences – for example, your main home may not be wholly exempt from Capital Gains Tax as it is here in the UK, and the IRS do not consider investments such as ISAs to be tax-free – which can result in tax bills to a country that you may never have visited. No wonder that the numbers surrendering their US nationality increased from 933 in 2012 to 3,014 in 2013!
So compared to some, the UK government isn’t too bad, by and large – whereas we get a dispute over claiming for a duck house, or the relief for a second “home” (but notably, the relief for the second home – human that is, not duck – is in the legislation; the MP’s just got rather carried away with their claims), it was reported in October that about 60 French MPs are facing investigation for allegedly failing to declare their full wealth or income, after the French Budget Minister was compelled to resign after he admitted holding funds in a secret Swiss Bank account, and their Trade Minister lasted just nine days in office before he resigned over ‘tax problems’.
Back in Blighty, after Christmas-time in the UK, please don’t forget to ensure that your 2014 Self-Assessment Tax Return is filed and any taxes due are paid by 31st January 2015. Late taxes and Tax Returns do attract penalties and interest. After all, we may have to pay taxes but there is no point in giving the Taxman a tip.
Merry Christmas all…!
For further information on any of the above points or to discuss your tax affairs generally, please do not hesitate to contact Robin Beadle.