The return of that 'fat' controller

After three months away I am now back in the signal box, with a pencil behind my ear and an oily rag tucked into my back pocket. Yes, the engine is ready to roll out from the sheds - climb aboard!

So, what's happened in the last three months? Well, I've got a much tidier garden and a nice tan, thanks for asking. But I'm sure that what you really want to know about is the developments in tax law which have affected you and your clients. Here are a few juicy highlights, some of which will be covered in more detail in future editions:

1. Part 7A - the disguised remuneration rules

I was hoping that this was a Dallas-style bad dream and that I would wake up one day to find life back to normal. Unfortunately it appears that the new rules are a reality and despite some necessary tinkering, clarified in the latest FAQs issued by HMRC on 5th July, we will have to live with them. In future editions I will examine what's left after HMRC's 'scorched earth' policy towards tax planning for executive pay.

2. Statutory interpretation

Sounds boring I know, but the case of Mayes v HMRC is actually very interesting and extremely relevant to the Part 7A rules (although the case was about life assurance policies, not Part 7A). This was a Court of Appeal case and it found that where parliament introduces 'highly prescriptive anti avoidance legislation' then there is little justification for the courts to apply purposive interpretation rules to a taxpayer's avoidance strategy, even if it is convoluted and complex, thereby effectively limiting the application of the Ramsay principle. Bearing in mind that the Part 7A rules are 'highly prescriptive' it does mean that legitimate (i.e. non-sham) avoidance strategies, regardless of how convoluted, should be safe from a Ramsay-style attack from HMRC.

3. Statutory residency test

The moral of this story is be careful what you wish for. We have all been clamouring for some statutory certainty to the mess that is residency law. Now that I have seen HMRC's proposed new rules, I think I prefer the uncertainty! The main innovation seems to be the slashing of the 90 day rule for visitors down to a 45 day rule. For people leaving the UK you can still be resident here if you spend only 10 days in the UK (10 days!!! even Scrooge would find that mean). It's a little bit more complicated than this, as one has to look at various 'factors' (such as available accommodation), before coming to a final decision on the number of days allowed. I will devote an entire tax engine edition to this subject later on this year.

4. Pensions

The wonderful world of unregistered pensions is still wonderful, albeit complex. I will examine the current landscape for holders of EFRBS and IPPs, in particular the ability to transfer the latter into the former or into a QNUPS. I will also look at the latest developments in QNUPS and QROPS and reminding you, my loyal readers, that there is still plenty of life left in these products, particularly for wealthy individuals who are funding contributions out of their own resources, rather than from an employer.

5. EU law & transfers of assets abroad

It seems I am no longer a lonely voice on the benefits of using EU based structures to avoid the 'transfers of assets abroad' legislation. I have already mentioned in a previous edition the legal opinions issued by the EU Commission in February 2011, which stated that TCGA s.13 and ITA ss.714-751 potentially breach Article 49 of the Treaty. I want to take a closer look at what this actually means and the possibilities for private clients to exploit the protections offered by the EU Treaty. I will look at what's possible and what's not - in particular making a careful distinction between EU and non-EU based investments.

6. Intellectual property rights (IPRs)

Some interesting developments here, most notably the proposal of new 'patent box' legislation, by which royalties from certain IPRs will only be taxed at 10% in UK companies. The government is clearly introducing these rules to try and make it less attractive to use offshore structures. Have they succeeded? I will be looking at the new rules and how they compare to the offshore alternatives.

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