UK: The Tax Bill - Ten Topical Tax Things You Might Like To Know, But They Don’t Want You To

Last Updated: 12 May 2011
Article by Brian Egan and Gordon Hayden
  1. If a bank enforces its security over an asset, and forces a sale of the asset, the bank must pay any capital gains tax (CGT) liability arising directly out of the sale proceeds. In situations where there have been equity releases on property in recent years (followed by a slump in property values) it is very possible that CGT liabilities will arise even though the sale proceeds would not be enough to clear the bank debt. Property developers, banks and NAMA might take note as this is sure to create issues for them.
  2. On a similar theme, if a bank appoints a receiver over a tax incentive property, and a clawback of capital allowances previously claimed by a tax investor occurs on a sale by that receiver, it is arguable under the law that the receiver/bank may become liable for the tax on the capital allowance clawback to the Revenue. Tax investors and banks might take note.
  3. Continuing the banking theme, under principles established in a European Court ruling, a bank operating through a subsidiary in one European country, which writes off the value of loans to customers and creates losses in its accounts as a result, may be able to seek a valuable tax deduction for those losses in another European country. The exchequer in countries with profitable headquartered banks might bear some cost for banking mistakes in another country.
  4. Tax paid by vendors of land on foot of signing a contract, where completion of the contract is now clearly not feasible, can be recovered if the contract is cancelled and the sale abandoned. In many cases it is more attractive to seek 20% tax back off of the Revenue (who have money) and keep your land, than it is to seek 100% consideration through the courts from property developers (who are largely without money).
  5. Property developers who are largely without money (because of debts due to banks which far exceed the value of lands purchased), but who may have ongoing income may be in a position to not pay any tax on salaries, rents, fees, profits – simply by offsetting the rolled up interest on loans (which may never get paid) against their other income. Refunds of PAYE paid can be obtained directly from the Revenue.
  6. A real expectation exists among tax professionals generally, that the CGT rate will increase from the present 25% in 2012 or 2013. Those who know a disposal of assets on which a taxable gain will arise is an inevitable certainty for them, might consider accelerating the timing of such a disposal to take advantage of the present rate.
  7. It is still possible to avoid paying Irish CGT (and avoidance is a perfectly legal activity don't forget) on non-specified asset disposals by taking up residence in another country with which Ireland has a tax convention. Those expecting to realise €millions in gains might consider their options.
  8. It is still permissible to organise your affairs in a tax efficient manner. Whether you personally or your company should hold assets and debt, what level of salary or pension your spouse should be paid for working in the family business, if you or your spouse are not Irish domiciled – tax can be mitigated.
  9. Medical professionals may, in suitable commercial circumstances, be able to incorporate their businesses (transfer the businesses to a company) thus reducing income tax bills significantly and benefiting from lower corporate tax rates and a more flexible pensions regime. Men (and women) in white coats might take note.
  10. Despite many lengthy legislative changes and developments in the world of Irish taxation, it is still possible to reduce your tax bills in a sensible way if you obtain the correct advice.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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