Preços de transferência.
Os esquemas de opções de ações para funcionários estão crescendo em importância em toda a OCDE e isso levanta várias questões para a política tributária nacional e internacional. Em vista disso, o Comitê de Assuntos Fiscais da OCDE está realizando trabalhos sobre o tratamento de opções de ações em tratados fiscais, o tratamento doméstico de esquemas de opções de ações e as implicações de preços de transferência de esquemas de opções de ações.
Diversas questões relacionadas a tratados tributários surgem ao considerar as opções de ações dos empregados:
Diferenças de tempo para benefícios de emprego. Determinar a qual serviço uma opção está relacionada. Distinguir renda de emprego de renda de capital. Imposto de residência múltipla. Alienação de opções de ações. Diferenças na avaliação entre mercados.
O trabalho nessas questões está bastante avançado, e um rascunho de discussão que descreve essas questões e propõe possíveis interpretações e soluções no contexto do Modelo de Convenção Tributária da OCDE está agora disponível para comentário público (ver: Questões de Imposto de Renda Transfronteiriço Surgindo de Estoque de Funcionários Planos de opções - um rascunho de discussão pública). Observe que, a pedido das pessoas que desejarem fornecer comentários sobre este rascunho, o prazo original para comentários, que foi 31 de julho de 2002, foi adiado para 31 de outubro de 2002.
Tratamento Tributário Nacional.
O trabalho nesta área destina-se a fornecer informações e análises para ajudar os países a alcançar suas próprias decisões políticas. A análise se concentra em três áreas:
Descrição do tratamento fiscal atual dos esquemas de opções de ações para funcionários nos países da OCDE. A análise de qual forma de tratamento tributário proporcionaria neutralidade em comparação aos salários. Identificação e discussão de argumentos que são avançados em favor e contra a taxação de opções de ações de funcionários de forma diferente dos salários.
Este trabalho está em andamento. No entanto, já está claro que existem grandes diferenças entre os países da OCDE na maneira como as opções de ações dos funcionários são tributadas. Além disso, vários países da OCDE têm mais de um tratamento tributário de esquemas de opções de ações para funcionários, dependendo da natureza precisa dos esquemas.
Problemas de preços de transferência.
Essa área de trabalho analisa as implicações das opções de ações dos funcionários para transações entre empresas e o princípio do braço. Problemas incluem:
A empresa emissora deve cobrar do empregador (se diferente) pelas opções de ações? Como as opções de ações dos funcionários afetariam os métodos de preços de transferência padrão? Como as opções de ações de funcionários afetariam os acordos de contribuição de custo?
Preços de transferência: transações entre empresas conectadas.
Como as transações entre empresas conectadas devem ser pagas para fins de tributação no Reino Unido.
Visão geral.
A legislação de preços de transferência do Reino Unido detalha como as transações entre as partes conectadas são tratadas e em comum com muitos outros países é baseada no "princípio de independência de braço" internacionalmente reconhecido.
A legislação do Reino Unido permite apenas um ajuste de preços de transferência para aumentar os lucros tributáveis ou reduzir uma perda fiscal. Não é possível diminuir os lucros ou aumentar uma perda fiscal.
A legislação de preços de transferência do Reino Unido também se aplica a transações entre quaisquer entidades do Reino Unido conectadas.
O princípio do "comprimento do braço" aplica-se a transações entre partes conectadas. Para fins fiscais, tais transações são tratadas com referência ao lucro que teria surgido se as transações tivessem sido realizadas sob condições comparáveis por partes independentes.
Isenções.
Sua empresa é uma empresa "pequena" se não tiver mais de 50 funcionários e um volume de negócios anual ou balanço total inferior a 10 milhões de euros.
A sua empresa é uma empresa de "tamanho médio", se não tiver mais de 250 funcionários e um volume de negócios anual inferior a 50 milhões de euros ou um balanço total inferior a 43 milhões de euros.
Outras informações.
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Imposto de selo em ações.
Imposto de renda a pagar em transferências de ações em papel, obtendo o formulário de transferência de estoque carimbado e o serviço de carimbo no mesmo dia.
Quando você compra ações e o preço que você paga é maior que £ 1.000, e a compra é registrada em um formulário de transferência de estoque, você precisa obter o formulário carimbado pela HM Revenue and Customs (HMRC) e deve pagar o imposto do selo ( SD ).
Para as ações que você comprou eletronicamente ou sem um formulário de transferência de estoque, consulte o guia sobre Imposto de Reserva de Imposto de Selo (SDRT).
Compartilhe transferências no valor de £ 1.000 ou menos.
Se você comprar ações e ações por £ 1.000 ou menos, normalmente não precisará pagar nenhum SD e não precisará informar o HMRC sobre a transação, mas precisará:
Certifique-se de que o primeiro certificado de isenção no final do formulário de transferência de estoque foi preenchido - não é necessário preencher este certificado se você não pagar nada pelas ações enviar o formulário de transferência de estoque e o certificado de ações para o registrador. a empresa que você comprou ações - se você deu alguma coisa para as ações ou não.
O endereço do registrador está no certificado de compartilhamento. O registrador emitirá seu próprio certificado de ações.
Compartilhe transferências assinadas antes de 13 de março de 2008.
As regras acima foram aplicadas desde 13 de março de 2008. Se uma transferência de ações com um valor de £ 1.000 ou menos foi acordada e assinada antes dessa data, você deve carimbar o carimbo do HMRC e terá que pagar o SD.
Compartilhe transferências por mais de £ 1.000.
Se você comprar ações e ações por mais de £ 1.000, normalmente terá que pagar o SD e terá que enviar ao HMRC o formulário de transferência de estoque para carimbar, juntamente com o seu pagamento.
Calculando quanto SD pagar.
A quantia de SD paga é baseada na "cobrança imputada" que você dá pelas ações ou ações. A consideração passível de cobrança pode ser:
Você paga SD à taxa de 0,5% do valor da contraprestação cobrável, arredondada para o valor de 5 £ mais próximo, em cada documento a ser carimbado.
A Ben Harris compra ações usando um formulário de transferência de estoque e paga £ 1.995.
A taxa de SD é de 0,5%. Então, £ 1,995 × 0,5% = £ 9,97. Isso é arredondado para o £ 5 mais próximo, o que significa que Ben paga £ 10 SD.
Concluindo um formulário de transferência de estoque.
Ao preencher um formulário de transferência de estoque, você deve fornecer todos os detalhes da venda, incluindo:
as ações sendo transferidas (a quantidade, classe e tipo, por exemplo, 100 ações ordinárias, ABC Limited) a consideração do comprador o vendedor.
Se você não der qualquer consideração pelos compartilhamentos, deverá inserir "Nil" como o dinheiro da contrapartida. Se você considerar em dinheiro as ações, indique quanto. Se você der outra consideração que não seja em dinheiro para as ações, indique o que você deu, por exemplo, 100 ações ordinárias na XYZ Limited, a dívida assumiu £ 70.000.
Se a transferência estiver isenta de SD, ou se não for dada uma contrapartida pela transferência, você precisará preencher um dos certificados no verso do formulário de transferência de estoque. O certificado que você precisa concluir depende dos fatos.
Certificado 1.
Você deve preencher o certificado 1 se ambos os itens a seguir se aplicarem:
A consideração que você dá para as ações é de £ 1.000 ou menos, a transferência não faz parte de uma transação maior ou de uma série de transações em que o total excede £ 1.000.
Certificado 2.
Você deve preencher o certificado 2 no verso do formulário de transferência de estoque nas seguintes situações:
a transferência é isenta de SD, por exemplo, transferências em conexão com o divórcio ou a dissolução de uma sociedade civil a consideração dada não é consideração exigível.
Nenhum certificado necessário.
Você não precisa preencher nenhum dos dois certificados em que não é dada nenhuma consideração pelos compartilhamentos ou se estiver reivindicando um alívio do SD. Se você está pedindo um alívio, precisará enviar o formulário de transferência de estoque preenchido, juntamente com os detalhes do relevo que você está reivindicando para o HMRC para carimbo.
Obtendo seu formulário de transferência de estoque carimbado.
Você deve enviar o formulário de transferência de estoque para o HMRC para carimbar dentro de 30 dias da "data efetiva" da transferência - normalmente a data em que o formulário é assinado.
Quando você envia o formulário de transferência de estoque para o HMRC, ele deve ser totalmente preenchido, assinado e datado. Você também deve incluir:
qualquer acordo e documentos de suporte se o HMRC tiver emitido um parecer formal ou adjudicação de quanto você deve pagar um envelope auto-endereçado - tamanho C4 para até 4 documentos ou C3 para mais de 4 documentos para o HMRC retornar os documentos carimbados para você .
O SD também deve ser pago antes que o HMRC possa enviar os documentos carimbados. Quaisquer atrasos no seu pagamento podem atrasar os documentos enviados para você.
O HMRC geralmente lida com formulários de transferência de estoque dentro de 10 dias úteis após a obtenção deles. Você deve conceder 15 dias para que eles tenham tempo de serem devolvidos pelo correio.
Erros que causam atrasos.
Há várias razões pelas quais o HMRC pode rejeitar sua inscrição. Os mais comuns são:
Se o formulário de transferência de estoque não for datado, o SD não será arredondado para as 5 libras mais próximas em cada documento. O valor da contraprestação não é mostrado no formulário - lembre-se de que se as ações forem dadas como contrapartida, será necessário fornecer o valor das ações. .
O que acontece depois.
Depois que você receber o formulário carimbado no HMRC, envie-o ao registrador da empresa na qual comprou as ações, junto com o certificado de compartilhamento. O endereço do registrador está no certificado de compartilhamento. O registrador emitirá o seu próprio certificado de ações.
Serviço de carimbo no mesmo dia.
O serviço de carimbo do "mesmo dia" só está disponível em circunstâncias excepcionais, como circunstâncias inesperadas ou imprevistas, quando é essencial que um documento seja carimbado imediatamente.
Você não pode usar o serviço no mesmo dia se a urgência puder ter sido evitada por uma das partes ou por seus respectivos agentes.
Isso é importante quando a adjudicação é uma exigência legislativa para a estampagem, seja devido à reivindicação de um alívio ou por algum outro motivo. Nestas circunstâncias, o serviço de estampagem no mesmo dia não será considerado. O HMRC espera que o número de ocasiões em que o serviço de estampagem no mesmo dia seja mínimo.
Se você ficar ciente de que uma transação pode precisar de um instrumento carimbado com pouca antecedência, você deve escrever para a equipe de SD dando o máximo de detalhes possível, incluindo:
número de instrumentos a carimbar razão específica ou razões para o valor do pedido de SD.
Em circunstâncias excepcionais, um pedido para o serviço de carimbo do "mesmo dia" pode ser feito entrando em contato com o serviço de estampagem de "mesmo dia".
Relevos e isenções.
Existem algumas transações de ações que se qualificam para benefícios ou isenções que podem reduzir a quantia de SD que você paga ou são totalmente isentos de SD.
Se você se qualificar para o alívio, precisará se inscrever no HMRC para que ele possa confirmá-lo. Caso contrário, você terá que pagar o valor total do SD.
As transações que se qualificam para alívio incluem:
transações entre empresas relacionadas - conhecidas como alívio de grupo, algumas reconstruções de empresas e compras de aquisições de ações por instituições de caridade.
Se você pagar muito SD em uma transação, poderá reivindicar um reembolso.
Os reembolsos devem ser reclamados no prazo de 2 anos a contar da data do documento carimbado. Se o documento não for datado, um reembolso poderá ser solicitado dentro de 2 anos da primeira execução.
Envie seu pedido por escrito para o Birmingham Stamp Office dizendo por que você acha que um reembolso é devido e forneça:
o original carimbado documenta os nomes das partes envolvidas.
O Stamp Office escrever-lhe-á se necessitar de mais informações para apoiar o seu pedido.
Se o seu reembolso for acordado, o SD será reembolsado, geralmente com juros, a partir da data em que o imposto foi pago.
Reembolsos CHAPS.
Se o valor total dos reembolsos solicitados for de £ 150.000 ou mais, você poderá solicitar o pagamento por transferência eletrônica do CHAPS. Você precisará incluir seus dados bancários com sua reivindicação.
Obtendo uma opinião.
Ações do Reino Unido compradas do exterior.
Se você comprar ações de uma empresa do Reino Unido enquanto estiver no exterior, ainda precisará pagar o SD e obter os documentos de transferência carimbados. Se você não fizer isso dentro dos limites de tempo, poderá ter que pagar uma multa e juros.
Se você comprar ações estrangeiras, não precisará pagar pelo SD. Se, no entanto, você trouxer um documento de ações para o Reino Unido transferindo ações estrangeiras, poderá haver uma cobrança para a SD. Pode haver outros impostos estrangeiros a pagar.
Se você precisar de alguma ajuda para trabalhar se tiver que pagar o SD, entre em contato com o HMRC.
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Imposto sobre as sociedades e preços de transferência.
Imposto sobre as sociedades e preços de transferência.
Por muitos anos, as regras de preços de transferência protegeram a base tributária do Reino Unido. Estas regras foram introduzidas para capturar transacções transfronteiriças, em termos de comprimento de mão-de-obra, entre partes ligadas. No entanto, como resultado da aversão da Receita Federal às recentes decisões judiciais da UE, o regime de preços de transferência do Reino Unido foi radicalmente alterado a partir de 1 de abril de 2004 e reforçado em 2005. As mudanças trazem transações entre empresas conectadas do Reino Unido o regime de preços de transferência do Reino Unido e, ao mesmo tempo, criar isenções para as pequenas e médias empresas (PME) ao abrigo dos critérios da UE. Além disso, a falha em manter registros suficientes justificando seu preço do Reino Unido para o Reino Unido incorrerá em penalidades, embora elas não sejam aplicadas no período até 31 de março de 2006. No entanto, se os lucros surgidos depois de 1 de abril de 2004 estiverem incorretos, ser imposta em adição ao imposto pendente e juros sobre o mesmo.
Qual o efeito das mudanças?
Uma transação de duração limitada não ocorre a menos que os termos de qualquer transação entre partes conectadas sejam aqueles que se aplicariam se a transação (s) tivesse sido realizada entre partes independentes.
Se a sua empresa do Reino Unido, que não é uma PME, transacionar com outra parte conectada do Reino Unido em termos de comprimento que não seja de arma, e consequentemente você subestimou sua receita ou exagerou suas deduções, você está agora obrigado a fazer um ajuste de preços de transferência em sua declaração de imposto sobre a corporação. O ajuste deve ser para aumentar os lucros, ou diminuir as perdas, para refletir a aplicação do princípio do comprimento do braço na transação.
Se a outra parte na transação estiver sob a cobrança do imposto do Reino Unido, ela também poderá reivindicar um ajuste correspondente. Isso não necessariamente equivalerá a um resultado neutro para as duas empresas juntas, no entanto. Por exemplo, a empresa que faz o ajuste de preços de transferência pode ter um aumento de responsabilidade tributária, enquanto, por exemplo, devido a perdas transportadas, a empresa que solicita o ajuste de compensação pode não obter qualquer benefício fiscal imediato ao fazê-lo.
Existe alguma isenção?
Para se qualificar como uma PME, o seu grupo ou empresa autónoma, deve ter menos de 250 empregados e um volume de negócios inferior a 50 milhões de euros ou ativos inferiores a 43 milhões de euros. Se você se qualificar, as transações com outras partes do Reino Unido (ou com partes em vários países estrangeiros, geralmente paraísos não fiscais) não precisarão ser ajustadas para os preços de preços de arm & trade; Apesar dessa classificação, a Receita reteve o poder de aplicar as regras a empresas de médio porte se elas perceberem a necessidade.
Não há isenções especificamente para empresas do mesmo grupo de empresas do Reino Unido. Também não existe qualquer isenção das regras para as empresas inactivas, excepto quando a empresa já estava dormente em 31 de Março de 2004. As empresas frequentemente inactivas têm saldos antigos, devidos ao grupo intra, em termos isentos de juros.
Quais transações serão afetadas?
A legislação é amplamente desenhada e visa capturar qualquer série ou tipo de arranjos, entendimentos e práticas mútuas envolvendo partes conectadas. Consequentemente, você não deve apenas considerar se o preço pago por algo é muito alto, mas também se a renda foi subvalorizada, ou talvez nem mesmo reconhecida. Por exemplo, ajustes apropriados de declaração de imposto teriam que ser feitos se uma empresa controladora do Reino Unido garantisse empréstimos de uma subsidiária no Reino Unido (onde nenhuma taxa de armamento é cobrada à subsidiária como uma taxa de garantia) que não poderia ter emprestado independentemente nos mesmos termos. Existem inúmeros outros exemplos de transações que serão afetadas, incluindo:
empresas que são levemente capitalizadas como resultado de juros incorrendo em quantias para outras empresas do grupo (quando comparadas com a cobertura de juros e fundos de acionistas); empresas que têm quantias que lhes são devidas de outras empresas do grupo em termos isentos de juros; empresas que prestam serviços a outras empresas do grupo em circunstâncias em que não é efetuada uma cobrança por tempo de arma. Isso pode incluir, em certos casos, o fornecimento de ações ou opções para funcionários de empresas do grupo.
Exclusões específicas existem onde outra legislação se aplica a transações entre pessoas conectadas. Este é o caso dos ganhos de capital e dos subsídios de capital, onde "valor de mercado" é frequentemente substituído. Também pode ser aplicado quando uma filial do Reino Unido faz negócios com a sede de uma empresa não britânica.
Qual ação é necessária?
Se nenhuma das exceções acima se aplicar, você deverá revisar todas as transações com partes conectadas, incluindo: níveis de dívida; garantias; interesse; aluguéis; royalties e encargos de gestão; bem como transações em bens físicos e prestação de serviços. Você também precisará compilar e reter registros documentais que justifiquem os preços usados. Por favor, esteja avisado que o não cumprimento pode resultar em penalidades. A Inland Revenue afirma que a documentação deve incluir:
um registro das transações comerciais ou financeiras afetadas; a natureza, termos (ex. preços) e quantum envolvidos; o método pelo qual os itens acima foram alcançados, incluindo um estudo de comparáveis; evidência de como o método resultou em termos de comprimento de braço; e acordos comerciais contemporâneos (por exemplo, contratos de distribuição e contratos de empréstimo), quaisquer orçamentos e previsões ou outras informações confiáveis.
A Receita indicou que o grau de pesquisa e documentação esperado refletirá os níveis de tributação em questão.
E finalmente.
Este Taxflash descreve os principais aspectos das atuais regras de preços de transferência que afetam as empresas. Esteja ciente de que as regras de preços de transferência também são aplicáveis a parcerias e a transações que uma empresa ou parceria pode realizar com um indivíduo ou um trust. Para obter mais orientações sobre os aspectos acima ou outros aspectos das regras de preços de transferência, entre em contato com seu parceiro ou gerente de impostos local da UHY Hacker Young.
Notas Adicionais:
Partes conectadas: partes envolvidas em uma transação, onde uma direta ou indiretamente controla a outra, ou onde ambas estão sob controle comum. A expressão também pode ser aplicada quando duas ou mais pessoas agem em conjunto para controlar a propriedade, ou uma pessoa age em conjunto com outra pessoa ou pessoas que têm controle.
Controle: inclui direitos e poderes presentes e futuros, exercíveis por uma pessoa, em seu próprio nome, em benefício próprio e, se aplicável, por seu cônjuge, outro parente ou por um curador de um assentamento em que a pessoa é o depositário.
Joint ventures (JV): Embora uma parte de uma JV não possa controlar a empresa da JV (seja uma empresa ou uma parceria), se eles e outra parte envolvida controlam a empresa. Pelo menos 40% dos interesses, direitos e poderes na empresa de JV, as regras de preços de transferência consideram as partes relacionadas com a empresa de JV.
¹ Transações: & # 8216; em um sentido muito amplo, incluindo quaisquer acordos ou entendimentos sobre o fornecimento de qualquer serviço ou instalação. & # 8217;
Publicado em 3 de agosto de 2006.
Últimas Notícias & # 038; Eventos
Beverley Hills, da Grã-Bretanha, fortalece sua posição como a principal fonte de impostos do Reino Unido.
De acordo com nossa pesquisa, os residentes em Elmbridge, em Surrey, estão pagando a maior quantia de Imposto de Renda no Reino Unido.
HMRC apertar parafusos em pequenas empresas traz £ 470m em imposto extra no ano passado.
De acordo com nossa pesquisa, o HMRC ganhou um adicional de £ 470 milhões de investigações realizadas nos assuntos fiscais de pequenas empresas no ano passado *, pois está sob crescente pressão para aumentar a renda das investigações fiscais.
As investigações do HMRC sobre "impostos de pecado" mal pagos rendem £ 1,6 bilhão.
De acordo com nossa pesquisa, investigações do HMRC sobre pagamentos indevidos de "impostos de pecado" sobre cigarros, o álcool rendeu 1,63 bilhão de libras em impostos extras este ano, um aumento de 6% sobre os 1,54 bilhão de libras levantados no ano anterior.
Downloads gratuitos.
Taxflash: taxas de milhagem & # 8211; Dezembro de 2017.
O HMRC publica regularmente taxas aprovadas de 'combustível único' que, novamente, mudaram.
Como garantir o tratamento de capital na compra de ações da própria empresa.
A capacidade de uma empresa de recomprar suas próprias ações de um acionista individual em termos que sejam benéficos para ambos, e mais importante para o acionista, é uma das áreas mais valiosas da legislação tributária.
Resumo do Orçamento de Outono de 2017.
O Chanceler Philip Hammond apresentou seu primeiro Orçamento de Outono na quarta-feira, 22 de novembro de 2017. Faça o download do nosso Resumo do Orçamento para obter informações sobre os problemas que podem afetar você, sua família e sua empresa.
Transferir preço.
O que é um 'Preço de Transferência'?
Um preço de transferência é o preço pelo qual as divisões de uma empresa negociam umas com as outras, como o comércio de suprimentos ou mão de obra entre departamentos. Os preços de transferência são utilizados quando entidades individuais de uma empresa de múltiplas entidades maior são tratadas e medidas como entidades geridas separadamente. Um preço de transferência também pode ser conhecido como um custo de transferência.
QUEBRANDO PARA BAIXO 'Preço de Transferência'
Os regulamentos sobre preços de transferência garantem a justiça e a precisão dos preços de transferência entre entidades relacionadas. As regulamentações aplicam uma regra de extensão que estabelece que as empresas devem estabelecer preços com base em transações semelhantes feitas entre partes que não são da mesma empresa relacionada, mas à distância.
Documentação necessária para preços de transferência.
Os preços de transferência são monitorados de perto nos relatórios financeiros de uma empresa e exigem uma documentação rigorosa incluída nos documentos de relatórios financeiros para auditores e reguladores. Esta documentação é minuciosamente examinada; se inadequadamente documentado, pode levar a despesas adicionais para a empresa na forma de impostos adicionais ou taxas de correção. Esses preços são rigorosamente verificados quanto à precisão para garantir que os lucros sejam contabilizados de forma adequada dentro dos métodos de preços longos e os impostos associados são pagos de acordo.
Os preços de transferência são frequentemente usados quando as empresas vendem mercadorias dentro da empresa, mas para partes da empresa em outras jurisdições internacionais. Esse tipo de preço de transferência é comum. Aproximadamente 60% dos bens e serviços vendidos internacionalmente são feitos dentro das empresas, e não entre empresas não relacionadas.
Os preços de transferência multinacionalmente têm vantagens fiscais, mas as autoridades reguladoras desaprovam o uso de preços de transferência para evitar impostos. Quando ocorre a precificação de transferência, as empresas podem contabilizar lucros de bens e serviços em um país diferente que pode ter uma taxa de imposto menor. Em alguns casos, a transferência de bens e serviços de um país para outro dentro de uma transação inter-relacionada pode permitir que uma empresa evite tarifas sobre bens e serviços trocados internacionalmente. As leis tributárias internacionais são reguladas pela Organização para a Cooperação e Desenvolvimento Econômico (OCDE) e firmas de auditoria dentro de cada declaração financeira de auditoria de localização internacional.
Boletim Fiscal 76 - Abril de 2005.
interpretações.
Diversos.
Auto-avaliação Tax Returns.
1. Algumas pessoas não receberão mais declarações de impostos.
Em abril de 2004, publicamos novas diretrizes para aqueles que deveriam concluir as declarações de impostos. Você pode encontrá-los em Auto-Avaliação e em Livreto SA / BK8 Auto-avaliação seu Guia. As novas diretrizes garantem que pessoas com questões tributárias diretas, cuja responsabilidade fiscal possa ser atendida por meio de deduções de PAYE, normalmente não sejam solicitadas a efetuar declarações de imposto de renda no futuro. A seguir, uma visão geral das novas diretrizes e procedimentos.
As novas diretrizes geralmente beneficiam:
Empregados pagando impostos na taxa mais alta. (Anteriormente, os funcionários que pagavam imposto de taxa mais alta tinham que preencher uma declaração de imposto, independentemente da complexidade de seus assuntos fiscais. Somente a alta taxa de responsabilidade não é mais um motivo para os funcionários receberem uma declaração.) Funcionários pagando imposto de taxa básica que reivindicam honorários profissionais e despesas abaixo de £ 2.500 por ano. (Anteriormente, os funcionários que reivindicavam mais de £ 500 tinham que preencher uma declaração de impostos.) Os funcionários com renda de investimento abaixo de & libra; 10.000 por ano. (Anteriormente, os funcionários com renda de investimento acima de £ 8.500 tinham que preencher uma declaração de imposto.) Pensionistas e pessoas de baixa renda com assuntos simples.
Agora existe um processo automático para identificar os funcionários para os quais não precisamos mais enviar devoluções no futuro. Quando uma declaração de imposto preenchida é recebida e inserida em nosso sistema de computador Auto-avaliação, o sistema verifica as entradas no retorno em relação às novas diretrizes. Quando um retorno não for mais necessário, ocorrerá o seguinte:
O contribuinte receberá uma notificação & # 8216; exit & # 8217; carta (SA251) e notas informando que eles não precisam mais concluir uma devolução. As notas explicam como os assuntos do contribuinte serão tratados dentro do sistema PAYE e o que precisa ser feito se as circunstâncias mudarem. Agentes autorizados receberão cópias da carta. Um sinal será definido no registro do contribuinte para impedir que os retornos sejam emitidos.
o futuro. Dependendo das circunstâncias do contribuinte, são feitos ajustes no registro de codificação do ano seguinte para garantir que qualquer imposto adicional seja pago através do PAYE. Qualquer ajuste será notificado ao contribuinte em um aviso de codificação antes do início do ano (copiado para o agente). Quando apropriado, o sistema notará o registro do contribuinte para emitir um formulário de uma página, o formulário Revisão de Impostos (P810), no mês de abril seguinte. Isso será enviado quando o contribuinte, por exemplo, fizer reivindicações de despesas ou doações do Gift Aid, ou tiver itens de renda sobre os quais o imposto adicional deve ser pago, como juros não tributados, etc. Ao receber o formulário de Revisão Fiscal preenchido, responsabilidade do ano será revisto e qualquer pagamento em excesso será reembolsado. Qualquer responsabilidade adicional será normalmente incluída no registro de codificação do ano seguinte. O formulário de Revisão de Impostos também será usado para atualizar o registro de codificação de renda e subsídios para o ano atual. Após o primeiro formulário de Revisão de Impostos, o contribuinte receberá formulários adicionais, em um ciclo de três anos ou, onde os assuntos do indivíduo estão mais envolvidos, anualmente. O contribuinte (ou seu agente, se tiver um) deve entrar em contato com o escritório de impostos a qualquer momento se seus assuntos mudarem e o registro de codificação não estiver mais correto.
Casos de baixa renda e pensionista.
Nesses casos, quando uma declaração de imposto concluída é recebida, o sistema identifica automaticamente os clientes que não precisam mais concluir os retornos. Nós então.
realizar uma revisão manual para garantir que os assuntos do contribuinte sejam suficientemente simples e estáveis para não exigir declarações fiscais para conclusão.
Alguns desses clientes precisarão enviar o formulário de Revisão de Impostos no lugar do retorno, e outros poderão ser configurados como casos de reembolso de impostos, de modo que o contribuinte receberá um formulário R40 para ser concluído no ano seguinte.
Em todos esses casos, o contribuinte e seu agente (se tiverem um) receberão um aviso de & # 8216; exit & # 8217; carta e notas, conforme descrito anteriormente.
Retornar às declarações de imposto de auto-avaliação.
O objetivo das novas diretrizes é reduzir a carga de conformidade dos contribuintes sempre que possível. O processo baseia-se na informação que um contribuinte dá em uma declaração fiscal. Mas as circunstâncias podem ter mudado desde que completaram a última declaração de imposto ou simplesmente preferem, por várias razões, continuar a receber e concluir as declarações fiscais. Onde o contribuinte (ou agente) entrar em contato conosco, nossos registros serão anotados para garantir que o contribuinte receba devoluções no futuro. O contribuinte (ou agente) também pode solicitar que definamos um sinal no sistema para garantir que eles não sejam removidos automaticamente no futuro.
As pessoas que retornarem para a Autoavaliação receberão um & # 8216; entrada & # 8217; carta (SA250) (copiada para o seu agente, se tiver uma), explicando que serão enviadas declarações de impostos para serem concluídas no futuro.
Se dissermos a alguém que não enviaremos devoluções de imposto no futuro, será responsabilidade do contribuinte informar-nos se houve alguma alteração em suas circunstâncias financeiras, desde as informações fornecidas em sua última declaração de imposto, que afetará o valor do imposto que devem pagar. Os contribuintes têm seis meses, após o final do ano fiscal, para nos informar sobre novas receitas ou ganhos que recebam. E se eles começarem a trabalhar para si mesmos (ou seja, se tornarem autônomos ou participarem de uma parceria), deverão informar-nos dentro de 3 meses da data de início. Podemos cobrar juros e multas se descobrirmos por outros meios ou se forem informados com atraso.
Em qualquer caso em que um retorno tenha sido emitido, ele deve ser preenchido a menos que tenha sido emitido por engano (veja o último parágrafo abaixo, por exemplo).
2. Retorno de imposto curto.
Nos últimos dois anos, testamos uma nova declaração fiscal mais curta. O idioma do formulário de 4 páginas e do guia, que o acompanha, foi simplificado. O novo formulário está sendo emitido nacionalmente este ano pela primeira vez e estimamos que cerca de 1,5 milhão de contribuintes devam recebê-lo.
O retorno de imposto curto (STR) contém uma seleção de perguntas do retorno principal que visam maximizar o número de pessoas elegíveis para usá-lo. Por conter perguntas limitadas, apenas aqueles cujos assuntos tributários são diretos podem usar o formulário. Estes incluem alguns empregados, pensionistas e trabalhadores por conta própria com volumes de negócios abaixo de 15.000. Além disso, eles podem ter uma renda de investimento direta ou uma modesta quantia de renda proveniente da propriedade. Pessoas que recebem receita de confiança e diretores da empresa, por exemplo, não podem usar o formulário.
As pessoas que se qualificarem para o STR receberão o formulário, juntamente com a orientação de acompanhamento (seu guia para a declaração de imposto curta), para ajudá-lo a concluí-lo. Como não há possibilidade de auto-cálculo no STR, nenhum guia de cálculo de imposto separado é enviado. Há, para aqueles que querem uma idéia de sua responsabilidade, um cálculo indicativo de 2 páginas no final do guia.
O STR é diferente da principal declaração de imposto, pois não possui páginas suplementares, com uma exceção, ganhos de capital. Este ano, estamos testando um novo suplemento de ganhos de capital mais curto para aqueles que usam o STR e que possuem ganhos de capital. Além de completar o suplemento de duas páginas, os contribuintes serão obrigados a enviar seus cálculos de ganhos de capital. Vamos monitorar o piloto ao longo do ano para ver quais problemas aparecem.
Existem algumas regras importantes que governam o uso do STR:
Como o STR é limitado, nós o enviaremos apenas para pessoas que, com base nas informações de seu retorno anterior, estejam dentro de seu escopo. Os contribuintes não podem escolher um STR e ele não estará disponível na Orderline, nos escritórios locais ou no site. No caso de perda ou destruição do formulário original, você deve entrar em contato com o escritório da Receita Federal emissora, que enviará uma segunda via. Aqueles que recebem o formulário devem decidir, usando o guia, se eles são, de fato, qualificados para usá-lo. As circunstâncias das pessoas mudam de um ano para o outro & # 8211; new sources of income arise which may fall outside the scope of the short return and prevent its use. People sent the form may choose not to use it if they prefer to send in a main return, either on paper or electronically. There is no electronic version of the STR or any substitute STR form. However, the on-line version of the main return effectively tailors the return to each taxpayer and provides other benefits such as an automatic calculation and immediate confirmation of receipt. The STR is not issued to people who filed their previous return after 31 January. A STR issued to one person must not be used by another. Apart from the fact that they may not be eligible to use the form, the STR carries a bar code, which identifies the person to whom it is addressed.
The STR has been designed to be captured automatically, improving speed and accuracy of processing. To ensure STRs are processed successfully:
All forms must be sent to our processing facility in Netherton. Reply envelopes are provided with the return. The forms must be correctly completed following the guidance on the front page of the form. Arithmetical errors or missing information, for example, will slow down the process. The actual STR form must be completed. A photocopy will not be acceptable. Any attachment to the form will slow down the process. Ideally the form should be sent back without any attachments. The only exception is the capital gains supplement and computations, where appropriate. Where additional information is essential it should be set out in a letter enclosed (not pinned or stapled) with the return.
Both of the procedures described above (no longer sending tax returns and the STR) rely on the information from the completed tax return for one year being entered onto our computer system before the selection for the following year’s return is made. The selection run is carried out in February. Paper returns filed later on in the filing period (from 1 October to 31 January) are not guaranteed to have been entered onto our system in time to influence the following year’s selection. In that event customers who are eligible for an ‘exit’ letter or a STR will continue to receive a main return. If a customer believes their return may have been submitted too late to qualify they should contact their tax office who may be able to help. However, those who file their returns after 31 January will not benefit from either the STR or an exit letter.
Both these measures have been successfully piloted. Research carried out shows them to have generated very high satisfaction ratings with taxpayers taking part in the pilots.
Sending Employer’s Annual Returns for 2004-05.
This article mostly concerns filing Employer’s Annual Returns online. However, it does have important information about sending complete and part Returns on paper.
Online filing from April.
With more than 500,000 employers, agents and payroll bureaux registered to use our online services, we are pulling out all the stops to make sure that online filing of Employer’s Annual Returns (P14 and P35 information) runs smoothly for employers and agents.
Most employers file online between 10am and 4pm. They might get a slightly speedier service if they can try to send Returns outside those peak hours. And it will help to avoid the peak filing days, usually 18 and 19 May.
Anyone can get help with online filing by calling our Online Services Helpdesk on 0845 60 55 999:
weekdays between 8am – 10pm weekends and Bank Holidays 10am – 18:00
Employers must not send us a paper P35 if they send their P35 online, even if they get one through the post. If we do get both, and the paper Return is accepted before the online Return, we will treat the Return as being made by paper. This means that large employers (250 or more employees) who must file online will incur the online filing penalty and small employers (fewer than 50 employees) will not get the tax-free incentive.
Special online filing arrangements for 2005.
It has proved necessary for the testing of our new computer systems for Employer’s Annual Returns to stretch into May.
Our new computer for sending information from your Employer’s Annual Returns to our other systems will go ‘live’ towards the end of May, later than the original planned switch-on date of 6 April. The later date will allow us to carry out more rigorous testing of our new processes. But we have taken every step to ensure that we are ‘open for business’ for 2004-05 online filing on 6 April.
From 6 April we will:
apply initial quality checks on Returns sent over the Internet at the Government Gateway; where these initial checks are passed, send an on-screen message saying that we have accepted the Return (Internet filers who have provided an email address and Electronic Data Interchange filers (EDI) will get an email); store successful Returns until the new computer is up and running; later, pass Returns to the new computer.
If the Return fails the initial checks at the Government Gateway, it is vital that it is corrected quickly and re-submitted by the 19 May filing deadline. So we urge employers and agents to allow plenty of time to file, and not leave it until the last minute and risk getting a penalty for not meeting the deadline.
Filing within seven days of 19 May.
Extra Statutory Concession B46 allows employers up to seven more business days after the Employer’s Annual Return filing deadline of 19 May to get their Return to us before we charge a late filing penalty. This Concession is intended to address the situation where a Return is delayed by something beyond the employer’s control, such as postal delays, but it also applies to online Returns as well as those sent on paper or by magnetic media. Although online transmissions are much faster than post, they are not always instantaneous. Sometimes, computer problems or problems with Internet connections can cause delays in online filing. So, if we receive the Return by 26 May 2005, we will not charge a late filing penalty.
What will happen in May and later this year?
Our new computer will apply further quality checks on P14s sent via the Internet, and then on the whole Return, including the P35. But a Return will not be rejected if it fails any of those further checks, as long as we have a full Return with no parts missing.
Where a Return fails the further checks, we will look into the reason for the failure. We will correct the Return with the help of the sender (probably by telephone). We will not charge a late filing penalty if the original Return was sent online by 19 May.
We will start these further checks towards the end of May. This means that we may be contacting employers and/or agents later than expected to put right errors in Returns filed in April or May. So employers will need to make sure that they have easy access to their 2004-05 end of year records from which the Return was made.
P14s sent by EDI will be validated immediately on receipt and Returns that include errors will be rejected for correction. Checks to see that the P14s and the P35 totals are correct will be done later, after the end of May.
The non-online filing penalty will apply where the complete original Return (P35 and all the P14 parts) is not sent online.
Re-submitting incorrect Returns.
Very exceptionally, we may need to ask the sender to correct a Return and re-submit it. Where this happens we will attach the original submission date to the Return and provided the original Return was received on time we will not seek to charge a late filing penalty. If the employer is unable to re-submit the replacement online because of limitations in their software, we will not seek to charge the non-online filing penalty and would be willing to pay the incentive to a small employer, as long as all of their original Return was sent online.
Sending Returns in parts.
Some employers will find that their business circumstances require them to send their Return in separate parts. We must have all the parts of a Return before we can make an incentive payment or prevent penalties.
If employers or agents file in parts (for example, send P14s in batches), the further quality checks will be applied to each P14 part separately and then to the whole Return (P14s and P35). Whoever sends in each part will get the same acceptance message saying: ‘The EOY Return has been processed and passed full validation’, even if there may be more parts to follow. It is important that the acceptance message is not misinterpreted as a successful submission of the whole Return. So whoever is sending the P35 Return part must make sure that every part has been or will be sent in. We recommend that agents tell their clients how many parts they intend to send and when they have been sent. We also recommend that the P35 is sent last.
Internet and EDI filers can replace a part as long as the replacement has the same Unique Identifier as the part that it replaces. A replacement must be done before the P35 has had the acceptance message.
Any changes or additions instigated by the employer after all parts of a Return, including the P35, have been accepted must be made as an amendment.
Sending supplementary or amended information.
The law requires employers to send a full and complete Return by 19 May. While we recognise that some employers need to make changes to their Return or send supplementary information, there is no provision in law for a second (supplementary) or amended Return. Where the employer recognises that a full Return was not made.
amended P14 and P35 details showing only the value of the changes; a letter to their Inland Revenue office setting out the reason the Return was not full and complete in the first place.
In line with Inland Revenue practice over many years, we will look at amended information and, where appropriate, consider a penalty under Section 98A(4) Taxes Management Act 1970.
We recommend that amendments are not sent until the end of May when the new computer system is up and running. Our systems will however be capable of accepting amended details from the outset.
Amended information does not have to be sent in the same way as the original Return. Amendments can be made on paper or by using the Inland Revenue’s free Online Return and Forms - PAYE service.
Using both Internet and Electronic Data Interchange.
EDI users who want to send their P35 over the Internet must register to use PAYE Online for Employers - Internet then choose to de-select the option to get P6s, P6Bs, P9s, Student Loans and tax credits forms sent to their Internet secure mailbox. Otherwise these will be sent to their secure mailbox and EDI output will stop.
To change the setting when activating, EDI users need to select ‘want to change’ under the ‘Statutory notices over the Internet’ seção. Details of all the above notices will be shown as automatically selected ‘Yes’. EDI users need to change the answer to ‘No’ for each of the notices they do not wish to get over the Internet. Preferences can be changed later by selecting ‘change your statutory notice’ option from the PAYE service page.
Small employers and the £250 online filing incentive payment.
We will not be able to write to small employers to confirm that we are crediting £250 to their account until their Return has gone through all of our quality checks. This may mean that we do not write to them until later. Employers cannot claim the £250 back from us as a cheque repayment until they get that letter.
An acceptance message will say that we have the Return, but our staff cannot check any figures until the new computer system is ready. This will limit the answers we can give small employers about their incentive payment.
But small employers do not have to wait for that letter to get their incentive payment. The on-screen message that we will send saying that we have accepted an online Return is the assurance that the employer has qualified. Anytime after getting that message, small employers can deduct (self-serve) £250 for filing online from their next payment for 2005-06 due to us, without having to wait for us to credit it to their payment record. Small employers sending their Return in parts must wait until every part of their Return has been accepted before deducting the incentive from a 2005-06 payment.
It would be helpful if employers could send us a ‘nil’ payslip for any complete month(s) or quarters covered by the tax-free payment to avoid unnecessary payment reminders. We must have written authority from an employer before we send the employer’s tax-free incentive payment to a third party, such as a payroll agent. The payment is only tax-free to the employer. Later, when we have all the parts of a Return and process the Return information to our various systems, we will credit the £250 to the employer’s payment record and send written confirmation that we have done this. Only at that stage, if the employer has not already self-served (and has no tax and National Insurance arrears), can he or she ask us to send the incentive payment as a cheque repayment.
Incentive payments are only available to employers that send every part of their Return online.
Changes to incentive regulations.
Changes to the incentive regulations (Statutory Instrument SI2005/826) were announced on 18 March. These changes are intended to deny incentive payments to a tiny minority of employers who, we believe intend to abuse the incentive process. The changes also clarify how the incentives will be applied or paid.
The changes introduce an anti-avoidance provision in order to refuse an incentive (or recover it where already paid) where the employing entity appears to have been set up, or to have paid PAYE income, wholly or mainly to gain the tax-free incentive payment. This provision will have no impact on our processing routines and is not intended to prevent the genuine small employer from benefiting from the incentive payment.
The provision is widely drawn to ensure that those abusing the incentive provisions cannot readily circumvent the new provision by making small changes to their artificial arrangements. We do not intend to use the provision to deny incentive payments to businesses that appear to have incorporated mainly to take advantage of wider tax breaks.
From 19 March, we will challenge the relevant employers with a view to not paying or withdrawing an incentive which has already been paid, where we have reason to believe that that the incentives provisions are being unfairly exploited. The employer will have the right of appeal to the Commissioners.
The anti-avoidance provision will apply to 2004-05 incentives for employers that make the first 2004-05 payment, which requires the creation of a P11 deductions working sheet (or equivalent IT record), after 18 March 2005.
For 2005-06 and subsequent years, the provision will apply to all employers.
The amendments to the regulations also clarify how the incentives will be applied or paid. With effect from April 2005, when any request for a cheque repayment of the incentive is made we will first set the £250 against any outstanding arrears of tax, National Insurance, student loan deductions and related penalties and interest. We will send a cheque for the balance. Cheque repayments of the incentive can only be considered after the employer has received written confirmation that the incentive has been credited to their payment record. These changes do not affect our advice to employers about utilising the incentive credit by deducting it from future payments.
Invalid National Insurance number prefixes for 2004-05 and 2005-06.
Temporary National Insurance numbers starting with TN must not be used in the National Insurance number field. Returns sent on paper will be sent back if temporary numbers are used. If the actual number is not known, the National Insurance number field must be left empty and the date of birth and gender fields completed. Temporary numbers allocated by software during the year must be removed before the Return is sent.
National Insurance number prefix ‘PZ’ is also not acceptable for 2004-05. National Insurance numbers starting PZ must be removed before the Return is sent.
Details of all the initial validation rules that can cause a paper Return to fail are on Page 2 of Finishing the tax year 2004-05 (booklet E10) available on the Employer’s CD-ROM 2005. National Insurance number prefixes NC, NK, NO, ZZ, XX and QQ will not be acceptable on Returns for 2005-06 and later years.
P35 tax avoidance schemes.
New rules putting an obligation on promoters and users of certain tax avoidance schemes and arrangements to disclose details to the Inland Revenue were announced on 17 March 2004. Initial plans to add a question about tax avoidance schemes to the P35 from 2006-07 have been deferred while the Inland Revenue evaluates the extent to which employers use tax avoidance schemes.
Any employers using a tax avoidance scheme should continue to send a completed form AIU4 to The Avoidance Intelligence Unit, 22 Kingsway, London, WC2B 6NR. Blank forms are available.
How to get another P35.
Employers who need a duplicate or additional P35, for example to send amended information, can contact their Inland Revenue office. Additional P14s are available from the Employer’s Helpline on 0845 7 646 646. You should get your stationary within five days of ordering it. So remember to place your order in time for you to send your complete Return by 19 May.
Do it online: Online filing and electronic payment handbook.
There is much more information about online filing in the recently updated Do it Online: Online filing and electronic payment handbook.
The taxation of Share Options:
Internationally mobile employees: an update.
Share options.
Os incentivos de ações disponíveis para funcionários de nível internacional podem assumir várias formas. This article is about share and stock options and updates previous guidance given in TB55 in the light of international consensus reached at the Organisation for Economic Co-operation and Development (OECD). This article supersedes Tax Bulletin 55 and also incorporates the relevant parts of Tax Bulletin 60. In particular, this Article explains how gains arising from the exercise of options are to be sourced on the employment exercised between grant and vest when considering a Double Taxation Agreement (DTA) (except for the US) on a workdays basis. This article is also published on the Share Schemes Website.
Os funcionários podem receber opções para adquirir ações de sua empresa empregadora ou de uma empresa do mesmo grupo. Typically the employee is granted options to acquire a specified number of shares at a price fixed at grant - the “option price”. Isso pode ser definido pelo valor de mercado das ações na data da concessão ou em um valor inferior. The option will then be exercised some time later, when the employee buys shares at the option price. As ações então pertencem ao empregado e geralmente podem ser vendidas imediatamente.
Legislação doméstica.
The UK tax treatment of such options in the hands of the employee depends on factors such as:
Whether or not it was granted under a plan providing income tax advantages - the Inland Revenue approved Company Share Option Plan, a SAYE share option plan or an Enterprise Management Incentive (EMI) option; The employee’s residence status at the dates of grant and exercise; The period over which the option can be exercised; Se a opção foi concedida a um preço abaixo do valor de mercado das ações no momento da concessão.
Este artigo se preocupa apenas com opções concedidas sob um plano de opção de ações não aprovado e exercícios de qualificação de opções concedidas sob um plano aprovado pela Receita Federal. A “non-qualifying” exercise here means one where the conditions for income tax relief have not been followed so that there is an income tax charge. An EMI also provides income tax exemption on the exercise of certain share options but income tax may be due if the options were issued at a discount to the share price or there has been a disqualifying event. Na medida em que os ganhos em tais opções permanecem no encargo do imposto de renda, este artigo se aplica a eles da mesma maneira que as opções de ações não aprovadas.
Normalmente, haverá implicações no imposto de renda do Reino Unido somente se o indivíduo residisse no Reino Unido na data da outorga, ou se a opção fosse concedida em relação a obrigações exercidas no Reino Unido. As the option over the shares is acquired by reason of employment an income tax charge may arise at:
The date the option was granted; A data em que a opção foi exercida; or The date the shares acquired at exercise are disposed of. (This generally relates to options granted to individuals who are not ordinarily resident in the UK at the date of grant – see Example 4).
Capital gains tax may be due where gains on the disposal of shares are greater than the gain chargeable to income tax under the Income Tax Earnings and Pensions Act (ITEPA). Examples are where:
The sale price exceeds the exercise price, or The individual was not resident in the UK at the date of grant.
Capital gains tax may arise where individuals are either resident or ordinarily resident in the UK at the date of disposal or if they are within the scope of the temporary non-residents rules contained in Section 10A, Taxation of Chargeable Gains Act (TCGA ) 1992. There are special rules for the tax year of commencement or cessation of residence and for non-UK domiciled individuals.
A UK tax charge may be triggered by other events, such as the assignment or release of an option to acquire shares or the conversion of shares acquired by reason of employment from one class of share into another class of share. Este artigo não pode cobrir todas as situações possíveis, mas a orientação sobre circunstâncias não abordadas aqui está disponível nos contatos listados no final.
Interaction with Double Taxation Agreements.
Se o empregado se deslocar entre países, uma taxa de imposto também poderá surgir em outro país quando a opção for exercida, atribuída ou liberada. This article sets out the Revenue’s practice from April 2005 for dealing with possible double taxation in the most common scenarios.
The UK has been actively involved with work at the OECD to reach a common international consensus on the treatment of share option gains. Discussion papers have been published as that work progressed and on 3 September 2004 the OECD announced that additional guidance would be incorporated in the next update of the OECD Model Taxation Agreement (the “Model”) and Commentary scheduled for 2005.
Se não houver um Acordo de Dupla Tributação (DTA, na sigla em inglês) com o outro país, ambos os países são livres para tributar a renda de acordo com suas leis domésticas. In accordance with its normal rules the United Kingdom will grant its residents unilateral relief in respect of foreign tax suffered on income that arises in another country but is taxed in the UK on the basis of residence.
If a comprehensive DTA exists it will normally have an employment income Article along the lines of Article 15 of the OECD Model Tax Convention. Os ganhos realizados a partir do exercício de opções outorgadas a um empregado são abrangidos pelo disposto neste Artigo e não pelos Artigos que tratam de outros rendimentos ou ganhos de capital.
O Artigo 15 (1) estabelece que, se um residente de um país exercer as funções de seu emprego no outro país, este último país reterá quaisquer direitos internos à tributação de remuneração e se beneficiará dessa parte do emprego. The OECD has now considered in detail how this applies to share options, where the entitlement to benefit from them accrues over a period of time when work may have been carried out in more than one country.
The OECD identifies two main sorts: American - and European-style options. In the UK virtually all the options we have seen follow the American pattern. These are granted with a future period of service required in order to qualify for exercise. The first date that they can be exercised is also known as the vesting date and the actual date of exercise may be then or afterwards.
The OECD concluded that:
Up to the point that an option is exercised the gain derives from employment and is governed by the Income from Employment Article in a typical double taxation treaty; At that point the employee makes an investor decision to use his or her own money to exercise and decisions from then, to sell or hold onto the shares, are those of a normal investor. So from that date the gain is a capital gain and within the Capital Gains Article if the relevant treaty has one; The period of employment on which exercise is contingent will run only to the date that exercise can first take place – the vesting date; The correct method of allocating taxing rights is by straight-line time apportionment, as the right to exercise is based itself on time spent in employment; Whether the gain on a share option is charged at grant, vesting, exercise or on sale of the shares acquired it should be regarded as the same source and credit available accordingly.
The new UK/Australia DTA has an Exchange of Notes that follows these lines.
Our existing guidance was set out in Tax Bulletins 55 and 60. This stated that where an employee:
was granted a share option in the UK during the course of an employment, exercised that employment in the other country during the period between the grant and exercise of the option, remains in that employment at the date of the exercise and, would be taxed by both of them in respect of the option gain; and is not resident in the UK at the date of exercise;
then the UK would give relief in calculating the tax charge for the proportion of the option gain which relates to the period or periods between the grant and exercise of the option during which the employee exercised the employment in the other country. This was also the line followed in the new UK/USA DTA. (The 5 factors above are those referred to in Frequently Asked Question 1 later in this article).
The Revenue has reviewed this existing practice in the light of the OECD’s published document. Whilst the OECD accepts that countries may, in their bilateral agreements, opt to apportion up to the date of exercise, the OECD recommendation is that the apportionment should be based on the period of grant to vesting. The UK seeks, as far as possible, to interpret its DTA in accordance with the OECD Commentary. With effect from 6 April 2005 , for options exercised on or after that date, the UK will base any apportionment on the period of employment up to the vesting date unless the DTA in question specifies another treatment (e. g. the UK/US Treaty). This will apply even when an option could have been exercised before 6 April but was not.
Where an option is exercised prior to 6 April 2005, the UK will continue to give relief for periods of employment in the other country up to the date of exercise. However when a taxpayer considers that it would be to their advantage to take the date of vesting, in accordance with the OECD recommendation, the UK will do so, unless the other country involved is the USA. Where the other country is the USA, apportionment of the gain between grant and exercise must continue as we have a specific Exchange of Notes in the new UK/USA double taxation agreement to that effect.
The OECD Report draws a distinction between “vesting” and “irrevocable vesting”. The Revenue has been asked to comment on these terms. Examples to demonstrate the concept of “irrevocable vesting” are not readily available. The OECD refer to there being “a condition that is applicable after the option becomes exercisable and under which the option will be lost if employment is terminated before the option is exercised.” Suppose an option is exercisable after 3 years employment but that the individual also has to be an employee at the date of exercise. The option vests at the 3 year point as this is when the individual becomes entitled to exercise the option. However, the option will only irrevocably vest when the individual actually exercises the option as at that point the final condition (of being employed at the date of exercise) disappears. References to the vesting date in this article refer to the time of “vesting” and not “irrevocable vesting”.
The gain will be time-apportioned on a straight-line basis by reference to workdays in the period of grant to vesting (or grant to exercise if the Treaty involved is the US/UK Treaty). OECD suggests a typical year can be taken as 260 workdays once, say, weekends and leave are excluded. We would expect to use the same measure of workdays for calculating relative periods in each country. Os períodos que não estão nesse emprego em particular são deixados de lado para que o rateio ainda seja feito com base em períodos relativos de emprego em cada país. The OECD work produced no justification for using any other basis.
Where the individual is resident for tax purposes in the UK at the date of the taxable event then credit relief may be appropriate. In accordance with the normal rules for credit, the amount due will be that relating to relevant periods of employment overseas. Any excess should be reclaimed from the other tax authority.
In the following examples:
All the share option plans are unapproved so that tax is due under UK domestic rules; & # 8226; All references are to the ITEPA unless otherwise stated; There is a comprehensive DTA with the overseas country containing a provision along the lines of Article 15 of the OECD Model (but the country is not the USA); All the options are American-style ones.
Mr. A is resident and ordinarily resident in the UK and working here on 1 January 2001. On that day he is granted an option to purchase 1,000 shares in the company in four years’ time at the 1 January 2001 market price of £1. On 1 January 2004 he is moved to another country and is still in the employment there when the option is exercised on 1 January 2006. At that date the shares are worth £5 each. The first date on which he could have exercised the option was.
A is resident and ordinarily resident in the UK at the date of grant and is therefore liable to income tax under Part 7 of ITEPA on any gain realised at exercise. O ganho é calculado como a diferença entre (a) o valor das ações na data do exercício e (b) o preço da opção pago mais qualquer contraprestação dada pela própria opção; in this case the gain is 1,000 x £4 = £4,000. This amount is classified as specific employment income under ITEPA and is therefore taxed without regard to the individual’s residence status at the date of exercise.
Between the date of grant and the date of vesting (1 January 2005) the employment has been performed in the UK for 3 years and in the other country for one year. 75% of the gain (£3,000) will therefore be assessed in the UK and 25% (£1,000) will be regarded as attributable to the other country.
The exercise of the option will be within the scope of PAYE by virtue of Section 696 if the shares are readily convertible assets (see IR’s Employment Income Manual EIM 12400). Under Section 696(2) the amount on which PAYE should be operated is the amount which, on the basis of the best estimate that can reasonably be made, is the amount of income likely to be chargeable to UK income tax. Portanto, se o empregador tiver informações suficientemente precisas sobre os períodos de emprego no exterior, ele poderá operar o PAYE para o empregado não residente apenas na proporção do Reino Unido.
The facts are the same as for example 1 except that A takes the whole of 2002 as a sabbatical year when he does not exercise his employment anywhere.
Three years have been spent in employment over the period between the grant and vesting of the option. The total gain in value of £4,000 is apportioned 67% to the UK and 33% to the other country.
Mr. B is resident and ordinarily resident in the UK and working here on 1 December 1999 when he is granted a share option. He works overseas during 2000. He returns to the UK on 1 January 2001 and is still in the employment here when the option vests and he exercises that option on 1 January 2005.
As B is not resident in the other country either when the option is granted or when it is exercised it is unlikely that any tax would be charged there in respect of the share option. Como ele é residente no Reino Unido tanto na concessão como no exercício, o Reino Unido irá tributar todo o ganho. If any tax has been paid in respect of the option in the other country for the year spent working there then the UK will give credit for this against the domestic income tax charge.
Mrs C is resident but not ordinarily resident in the UK when an option is granted. Ela ainda reside no Reino Unido quando exerce a opção e vende as ações. The charge on exercising options in Chapter 5 of Part 7 is predicated on the employee being resident and ordinarily resident in the UK at the time of grant so within the general charge under section 15 (Chapter 4 of Part 2) or section 21 (Chapter 5 of Part 2). Instead, Mrs C will be liable to UK income tax under Chapter 3C of Part 7 at the time of disposal of the shares as well as a possible annual charge under the benefits legislation. A taxa incide sobre a diferença entre o valor de mercado das ações no momento do exercício menos os valores pagos. This is treated as a notional loan written off within Section 446U and is taxed as specific employment income.
Se um indivíduo residir no Reino Unido tanto na data de concessão como na data de exercício, o Reino Unido terá direitos de tributação primários, mesmo quando um país parceiro do tratado deseje tributar o ganho de acordo com sua legislação interna. A claim under the DTA for credit relief may be relevant if the duties of the employment have been carried out in the other country during the period between grant and vesting of the option and double taxation has occurred. Currently, where an option is granted to an employee resident but not ordinarily resident in the UK who performs the duties of the employment both in and outside the UK, the Revenue treats a proportion of any gain on exercise of the option as relating to an employment not within the charge to UK tax. This calculation is based on the proportion of workdays in the period between grant and vesting (or grant and exercise if considering the US) that are outside the UK. This apportionment would not include any part of the period after the employee becomes resident and ordinarily resident.
Mrs C may be liable to UK capital gains tax on any gain she makes on selling the shares acquired by exercising the option. Her allowable cost will be the total of the amounts she paid for the option and shares together with any amount charged to UK income tax other than the annual benefits charge. There are special capital gains rules for non-UK domiciled individuals at Section 12, TCGA 1992.
Mrs D is not resident and not ordinarily resident in the UK when her employer grants her an option to purchase shares. Em algum momento antes do exercício, ela se muda para o Reino Unido e exerce as funções de emprego lá. Ela exerce a opção quando trabalha no Reino Unido e vende as ações.
Mrs D will not be liable to UK income tax on any gain realised at exercise, unless the grant of the option is clearly related to duties performed in the UK. In this case there could be a liability under Chapter 3C although all relevant facts and circumstances would need to be considered before determining whether or not a liability arises.
Ela pode, no entanto, estar sujeita ao imposto sobre ganhos de capital no Reino Unido sobre qualquer ganho realizado como resultado da venda das ações adquiridas após o exercício da opção. Isto seria assim se ela é residente ou ordinariamente residente no Reino Unido na data da alienação ou se ela está dentro do escopo das regras temporárias de não residentes contidas na Seção 10A, TCGA 1992. Existem regras especiais de ganhos de capital para o ano fiscal ela começa a residência no Reino Unido e para o caso em que ela é domiciliada fora do Reino Unido. Mrs D’s allowable capital gains cost would be the total of her payments for the option and shares, together with any amount charged to UK income tax.
Mesmo que o exercício normalmente não desencadeie uma obrigação de imposto de renda do Reino Unido nesse caso, isso pode dar origem a uma carga tributária em outro país. Where tax has been paid in a treaty partner country, the OECD view now is that the part of the gain up to the date of exercise should be treated as falling within the provisions of the employment income Article of the relevant double taxation agreement, regardless of the eventual type of tax levied in each country under their domestic rules. The UK will therefore allow the relevant proportion of the foreign tax paid as a credit against the UK capital gains tax:
If the options are exercised and the shares sold on the same day, the whole gain is treated as falling within the provisions of the employment income Article of the relevant DTA. Se as ações forem alienadas em uma data posterior, parte do ganho pode ser tratada como estando dentro do Artigo sobre rendimentos de emprego do contrato. The appropriate calculation of relief will be straight-line time apportionment in line with OECD views.
Perguntas frequentes.
Some FAQs on this topic were discussed in Tax Bulletin 60. We have also updated these.
Q1 Is relief by allocation of taxing rights ONLY available if the five factors detailed in TB55 and above are present.
We are able to give certainty in the most common situation where double taxation arises, which is when all five factors are present (NB the second factor should now be read as ‘exercised that employment in the other country during the period between grant and vesting of the option’). There are other situations in which some relief by allocation of taxing rights may be appropriate, for example if the employment ceased shortly before the options were exercised. However there are many permutations possible and it is not possible to deal with all of these in that article. Cases that do not fall within the circumstances described will continue to be considered on their own facts and in the light of the new OECD guidance.
Q2 Does an employment “continue” if the employee changes contractual employer on being relocated?
If the employers were in the same group of companies and the change did not affect the employee’s stock option rights, then the UK would normally regard it as one employment for the purposes of apportioning the option gain attributable to the UK.
Q3 Previously it has been possible to use methods of apportionment other than the straight-line time method. TB55 endorsed this “very occasionally”.
The Inland Revenue has always maintained that time-apportionment should be the expectation and in practice few cases have been seen claiming another basis – a handful only in the last 3 years. And in some of those the other country involved agreed to accept straight-line time apportionment after discussions. In the light of the new OECD guidance and international consensus we would not expect to agree cases using any other method of apportionment.
Q4. Is it necessary for the country of residence to actually tax the gain?
The normal expectation would be that tax would actually be levied. Exchange of information powers may be used to ensure the other country is aware of the option gain so can tax it if their domestic legislation permits.
Q5 If the employee is resident and ordinarily resident in the UK both when the option is granted and when it is exercised, can the gain ever be time-apportioned in the UK? Example 4 of TB55 implied that it can.
The statement that “a claim may be relevant under the employment income Article….” does not mean that relief would be due by leaving out of account a part of the gain that related to overseas employment. It was meant to reflect that relief by means of credit might be available if the UK recognised that another country had a valid claim to tax part of the gain because it could be said to be derived from employment performed there. We have reworded Example 4 in this article to make the position clearer.
Q6 Does it matter whether the option is over shares in an overseas or a UK company?
In general, no. The source for double taxation treaty purposes will be the employment, and where it is carried on.
Q7. Is any relief due on an option gain if an employee were resident in the UK at the date of grant but resident in a non-treaty country at the date of exercise?
Assuming the individual is also ordinarily resident at the date of grant, the whole gain is taxable in the UK under ITEPA. If there were overseas tax payable on any part of the share option gain, the UK would consider unilateral relief on a claim. However, unilateral relief is only available to credit overseas tax paid by a UK resident, or a person who is treated as such by section 794 of the Income and Corporation Taxes Act 1988, not by taking any amount out of account by time-apportioning a gain. The amount of unilateral relief may never exceed what would be available if a double taxation treaty with the country existed.
Q8 Is it possible to provide guidance on some other important issues, such as periods of residence in a third country, or short-term business visitors now that work at OECD has been completed?
Mr. E is granted share options on 1 January 2000 when he is resident and ordinarily resident in the UK and working here. He goes to country A on 1 January 2001 for a year then to country B on 1 January 2002. He is still living there on 1 January 2005 when the options vest and he exercises immediately. By then he is tax resident in Country B.
If Country B taxes option gains on exercise it will have the full right to tax Mr. E as he is resident there at that time. If a claim is made under the DTA between the UK and Country B, then the UK will regard one year’s worth of the option gain as derived from UK employment so, in accordance with Article 15(1) of the OECD Model will restrict taxation to 1/5 of the gain as this is the proportion that is sourced here.
Mrs. F is granted share options on 1 January 2000 when she is resident and ordinarily resident in the UK and working here. She spends 5 months from 1 January 2001 working in country A for her UK employer so that no tax is due in Country A and she remains resident for tax purposes in the UK. She then moves to Country B to work, becomes tax resident there and is still in Country B when the options vest and are exercised on 1 January 2005.
When the options are exercised the UK is not the country of residence so would confine taxation to the fraction of the gain that is derived from employment in the UK, i. e. one year’s worth out of the five.
Mr G is awarded restricted shares on 1 January 2000 as part of the bonus scheme for 1999. He immediately goes to work in Country A and becomes tax resident there. The restrictions will not lift until 1 January 2005, when he can sell the shares freely. UK IT is due at that date. He claims that the gain should be wholly apportioned to Country A under the relevant DTA.
Although the same principles will apply to other forms of share-based earnings besides options, the underlying facts may mean the result is different. Here the share award derives wholly from employment up to 1 January 2000. The period when restrictions on sale are imposed is merely a blocking period. The whole gain on sale therefore derives from UK employment and no reduction in UK taxing rights is made under the DTA.
Q9. What if the individual is a director?
Article 16 in the OECD Model DTA provides special rules for directors and takes precedence over Article 15. The Commentary to this will be expanded to make clear that share options are also within these special rules to the extent that they were granted to a person in their capacity as a member of a Board of Directors.
Q10. I work for a European multi-national and think therefore that the options I have been granted whilst working in the UK are not American-style ones.
This will be a question of fact. European-style options are usually a reward for past service and vest on the day they are awarded even though they cannot be exercised for a given period. In such a case time apportionment will not be appropriate unless work was carried out in another country before the date that the options were granted.
Q11 How will apportioning UK workdays operate in practice?
An employee is resident and ordinarily resident and working in the UK on 1 January 2003. He’s granted an option to purchase shares at a price of £1 conditional on remaining in that employment until at least 1 January 2006. On 31 December 2004, he moves to work in Country B where he becomes resident. He exercises the option on 1 July 2006 and sells the shares immediately. The benefit should be regarded as income from employment covered by Article 15.
The UK may tax the part of the stock option benefit that was derived from employment carried on in the UK, on the proportion of those days that were relevant for the stock option plan. If each year has 260 workdays then the days relevant to the stock option plan are 3x260 = 780. The UK may tax 520 (2x260) days of this and B may tax 260 days. The remaining days of employment between vesting (1 January 2006) and exercise (1 July 2006) are not relevant to the stock option plan so are ignored.
Mais conselhos.
Tax Bulletin 56 deals with National Insurance Contributions, and other issues around share incentives for internationally mobile employees are covered in Tax Bulletin 60. Updated guidance on National Insurance Contributions will be issued shortly.
Goodwill and Incorporation.
Introdução.
In recent years many sole traders have transferred their businesses to newly incorporated companies in which they have a controlling interest. In some cases the transfer will involve the company buying the goodwill of the business. This article explains when the Inland Revenue might challenge the value attributed to transferred goodwill and the tax consequences where it is established that the payment for goodwill exceeds its market value.
For simplicity this article focuses on transfers by sole traders. Similar considerations apply to the transfer of goodwill from individuals who carried on business in partnership.
When might the value of goodwill be challenged?
We are most likely to challenge cases in which we think that a transfer of goodwill may have taken place at overvalue. One concern is that any overvaluation of goodwill could, if unchallenged, allow the excess value to be wholly or partly sheltered from tax (because of various Capital Gains Tax (CGT) reliefs) while simultaneously inflating a loan account balance against which a participator could withdraw sums without attracting any tax liability. There may also be concerns when the goodwill acquired by the company falls within the Intangibles Regime 1 . Or if it seems that the type of goodwill reportedly sold to the company was associated with the personal skills and attributes of the sole trader so that it was not capable of being transferred to a company.
The Inland Revenue offers a free Post Transaction Value Check service 2 under which CGT valuations can be referred to Tax Offices for checking after the transaction has taken place but before the relevant return is submitted. Each request for a valuation check should be made on form CG34, available from the Inland Revenue website.
Ganhos de capital.
For the purposes of CGT where an individual disposes of goodwill to a company in which he (or he and persons connected with him) have a controlling interest the transfer is treated as having taken place other than at arm’s length. This means that for CGT the disposal by the individual and the acquisition by the company are deemed to have taken place at market value 3 .
Excess value may be employment income.
Where the goodwill was deliberately overvalued when it was sold to the company as an inducement for the individual to take up employment with the company, or in return for future services to be provided by the individual to the company, the excess payment will be taxable as earnings within Section 62 ITEPA 2003 4 . Where, exceptionally, excess value is paid in respect of the transferor’s employment but it cannot be characterised as ‘earnings’ the overvalue may be chargeable as a benefit under Section 203 ITEPA 2003. 5 Section 201(3) deems that any benefit provided by the employer is “by reason of the employment”.
In such cases the reporting obligation on the employer will depend on whether the excess value is regarded as earnings or a benefit. Earnings should be subjected to PAYE. A benefit should be reported on form P11D.
The Employment Income Manual (EIM) 6 provides guidance on the general rule for calculating the value of a benefit for income tax purposes and explains the concept of “making good”. The benefit charge can be reduced or extinguished by the employee paying some or all of the cost of the benefit or “making good” to the employer/provider. In certain cases the director may wish to repay some or all of the excess value and reduce the benefit chargeable to income tax.
The excess value is also liable for Class 1 National Insurance Contributions (NICs), because it derives from the employment and is therefore a payment of “earnings” as defined in Section 3(1)(a) Social Security Contributions and Benefits Act 1992. This treatment applies irrespective of how the payment has been characterised for income tax purposes. There is no provision for “making good” for NICs. So even if the tax charge on the benefit is reduced by making good, Class 1 NICs must be accounted for on the original excess value.
The charges would be considered to have arisen on the day the goodwill transaction took place.
Where the excess value is treated as employment income it may give rise to a Case 1 deduction for the cost borne by the company.
Excess value may be a distribution for tax purposes.
But in many cases the goodwill will have been transferred from a sole trader to the company before the company has commenced trading. There may be no evidence that any excess value constitutes earnings (or is a benefit).
So, in the majority of cases in which goodwill is transferred from sole trader to company we expect that the transferor will have received any overvalue in his capacity as shareholder, rather than as an employee/director 7 . In such cases the excess value will, for tax purposes, be treated as a distribution by virtue of ICTA88/s209(2)(b) or s209(4).
For NICs purposes, where the transferor receives any overvalue in his capacity as shareholder, rather than as an employee/director, that is derived from a shareholding and not employment. The overvalue cannot therefore be classed as earnings under section 3(1)(a) SSCBA 1992 and does not attract NICs.
Distribution: impact on individual.
Where it is established that the excess value is a distribution the individual will be treated as having received Schedule F income equal to the amount of the excess value plus the associated tax credit. If the individual is liable to income tax only at the lower and basic rates this tax credit will be sufficient to cover the ordinary rate Schedule F charge. If he pays income tax at the higher rate the tax credit will not cover all of the Schedule F liability and further liabilities will arise 8 .
Distribution: impact on company.
Where the goodwill is transferred before 1 April 2004 the characterisation of excess value as a distribution will not affect the company’s tax position.
For transfers on or after 1 April 2004 the distribution will have to be taken into account in computing corporation tax liability at the non-corporate distribution rate 9 .
‘Inadvertent’ distributions may be unwound.
Because of the uncertainties in establishing the value of goodwill there will clearly be occasions where a transfer is inadvertently caught by ICTA88/S209(4). If it is clear that there was no intention to transfer the goodwill at excess value, and reasonable efforts were made to carry out the transaction at market value by using a professional valuation, then the distribution may be ‘unwound’.
The distribution may not be unwound if there is attempted (or actual) avoidance, or if the overvaluation was intentional, or if no professional valuation was obtained 10 .
In this context we would normally regard ‘professional valuation’ as including one carried out by a named independent and suitably qualified valuer on an appropriate basis. But in some instances it may be necessary to establish what steps were taken to arrive at the value, what instructions/information were given to the valuer, whether it was reasonable for the parties to rely on the valuation provided etc. before an application for unwinding can be accepted.
Where it is agreed that an inadvertent distribution may be unwound the individual must repay the excess value to the company. Where the original sale proceeds were credited to a loan account that credit should be reduced, effective from the date of the original transaction. If the individual has drawn from the loan account on the strength of the original credit, rewriting the loan account to reflect the unwinding of the distribution may result in the loan account becoming overdrawn. If so, the company may be liable to tax under ICTA88/s419 (Loans to participators etc.)
Intangibles Regime From 1 April 2002 the new Intangibles Regime allows companies to claim an income deduction for tax purposes based on the goodwill amortisation shown in their accounts. Where the goodwill was acquired from a related party (such as a sole trader who controls the company) the Intangibles Regime will only apply if the goodwill was created wholly after 31 March 2002 11 .
Where goodwill has been acquired from a sole trader and income deductions are made under the Intangibles Regime, we will be concerned to confirm both that the goodwill was created wholly after 31 March 2002 and that for tax purposes the value of goodwill equates to its market value 12 .
Interpretations.
Non domiciled employees working in the United Kingdom: Dual contract arrangements.
Introdução.
Dual contract arrangements are popular with foreign domiciled employees who work both in and outside the United Kingdom (UK). Although there is nothing to prevent an individual from entering into an employment contract with more than one employer, we have become increasingly concerned that employers, employees and their advisers are providing us with written contracts that do not reflect the reality of the situation. This article explains a change of emphasis in the way that our offices will approach enquiries into dual contract arrangements. In summary, we believe that the commercial reality in some cases may be that the employee has just one employment.
Statutory position.
The question of the existence or otherwise of an employment usually arises for tax purposes where there is doubt over whether income derives from employment or self-employment. Once it has been established that an individual performs services as an employee, there is generally little difficulty in attributing earnings to a particular employment relationship.
The Employment Income parts of the Income Tax (Earnings and Pensions) Act 2003 (ITEPA) charge to tax earnings “from” employment. Although ITEPA does not attempt a comprehensive definition of employment, section 4(1) provides that “employment” includes “any employment under a contract of service”.
Chapter 5 part 2 ITEPA contains the rules for determining the taxable earnings of employees (and office holders) who are resident, ordinarily resident or domiciled outside the UK. Section 21 taxes the full amount of any general earnings for a tax year in which the employee is resident and ordinarily resident, but not domiciled, in the UK except to the extent that they are “chargeable overseas earnings” for that year. Section 22 provides that the taxable amount of chargeable overseas earnings is the full amount remitted to the UK in that year. Section 23 describes how to calculate chargeable overseas earnings. By section 23(2), “general earnings for a tax year are overseas earnings for that year if:
in that year the employee is resident and ordinarily resident, but not domiciled, in the UK, the employment is with a foreign employer, and the duties of the employment are performed wholly outside the UK.”
“Foreign employer” is defined in section 721(1) ITEPA as meaning “in the case of an employee resident in the United Kingdom, an individual, partnership or body of persons resident outside the United Kingdom and not resident in the United Kingdom or the Republic of Ireland, …”
Where the employment is in substance one whose duties fall to be performed outside the UK, the requirement that the employee performs the duties of the employment wholly outside the UK is subject to section 39. This provides that duties performed inside the UK, which are “merely incidental to” duties performed outside the UK, are to be regarded as performed outside the UK. In Robson v Dixon 48 TC 527, Pennycuick V.-C. observed that:
“the words “merely incidental to” are upon that ordinary use apt to denote an activity (here the performance of duties) which does not serve any independent purpose but is carried out in order to further some other purpose.”
So duties performed in the UK that are of the same type as those performed overseas are not merely incidental, even if performed for only a very short time.
The calculation of chargeable overseas earnings is set out in three steps in section 23(3). The first step is to identify the full amount of overseas earnings. The second and third steps adjust this figure by deducting allowable expenses and applying any limit required by section 24. Section 24 imposes a limit on how much of an employee’s general earnings are chargeable overseas earnings where the duties of an associated employment are performed in the UK. The limit is the proportion of the aggregate earnings for that year from all the employments concerned that is reasonable having regard to the nature of and time devoted to the duties performed outside and in the UK respectively and to all other relevant circumstances.
Dual contract arrangements.
The legislative scheme outlined above is advantageous to employees or office holders who can show that they are:
resident and ordinarily resident but not domiciled in the UK, and perform duties of an office or employment under a foreign employer wholly outside the UK.
As chargeable overseas earnings are taxed on remittance, there is a clear incentive to ensure that such earnings are paid overseas and to minimise the amount of earnings remitted to the UK. However, the requirement that the duties of the employment are performed wholly outside the UK presents problems to foreign domiciled employees whose jobs require them to work partly in the UK and partly abroad. Earnings from an employment with duties performed in and outside the UK would be taxable under section 21 wherever received. An employee may therefore be offered two employment contracts, for example:
(1) covering the performance of duties in the UK, and.
(2) with an associated employer resident overseas, covering duties performed in the rest of the world, excluding the UK.
The intention is that earnings from employment contract (2) will be chargeable overseas earnings and therefore taxable under section 22 only when remitted to the UK. For this reason, dual or multiple employment arrangements are popular with foreign domiciled employees whose duties are performed partly in the UK and partly outside the UK. The arrangement is generally that the individual enters into two separate written contracts, frequently referred to as the UK employment contract and the overseas employment contract.
Inland Revenue response to dual contracts.
Inland Revenue offices may make enquiries in order to check whether the earnings under the overseas contract are chargeable overseas earnings. They may also consider whether there is in fact a single employment contract notwithstanding the production of two written contracts. This approach has generally been deployed where there is concern that there has been an attempt to split a single employment to exploit the legislation that provides for chargeable overseas earnings to be taxed on remittance.
Employers, employees and their advisers maintain that there are separate and distinct employments. They invariably argue that the employee performs a different role with different responsibilities under each contract of employment and that the duties under each do not overlap and are not dependent on each other. In many cases written contracts have been drafted that fairly represent the true employment relationships and include a proper job description along with details of the remuneration package and other entitlements (annual leave etc) relating to each employment. Care has been taken to ensure that the roles described in each contract are capable of independent existence with proper regard given to what would happen on termination of one of the employments. Best practice has recognised the importance of maintaining separate payroll and expenses regimes and different line management and reporting arrangements.
Where there are two employment contracts and the written contracts reflect this, dual contract arrangements provide a legitimate way to structure an individual’s employment relationships. Where the Revenue is satisfied that the arrangements reflect the true employment relationships, enquiries focus on:
whether the employee has in fact performed substantive duties under the overseas contract in the UK, whether a section 24 adjustment is needed to address an imbalance between the earnings from the UK and overseas contracts.
Given the way in which modern business operates and the ease and speed of communication, some employees may find it increasingly difficult to avoid performing substantive UK duties under their overseas contracts. For example, an employee who is responsible under their overseas contract for servicing the business of overseas clients may have to respond to a telephone call or e-mail from a worried overseas client with an urgent problem when the employee is in the UK. Formulating and communicating a response to such a problem would be regarded as a fundamental duty under the overseas contract. It follows that the performance of such duties in the UK will not be merely incidental to the performance of duties outside the UK as they will be of equal importance to the overseas duties. It is the quality of the UK duties and not the time devoted to their performance that determines whether they are merely incidental.
Current developments.
We are increasingly seeing arrangements where the duties required under each purported employment contract are defined according to where those duties are performed. For example, the UK contract states that the duties of the employment are all those duties performed in the UK whereas the overseas contract states that the duties of the employment are all those duties performed wholly overseas. We are asked to accept that all overseas duties are duties of the overseas employment and all UK duties are duties of the UK employment. On that analysis, duties performed in the UK in connection with the business of the overseas employer are performed under the terms of the UK contract and are not duties of the overseas employment.
We do not consider that the existence of separate and distinct employments is determined by the terms of written contracts where the main distinction between the duties required under each contract is geographical. We have become increasingly concerned that arrangements of this nature artificially divide a single job so earnings attributable to overseas duties can be treated as chargeable overseas earnings. We have now received legal advice that supports a robust challenge to such arrangements.
Change of emphasis.
As a result of the legal advice referred to above, we intend to change the emphasis in the way in which we currently approach enquiries involving dual contracts. In our view, a dual contract arrangement based solely or mainly on a geographical split of employment duties without commercial underpinning is vulnerable to challenge on the grounds that there is in reality a single employment with duties in and outside the UK. When we come across such cases, we intend to fully investigate the facts and circumstances including the commercial rationale and context and to assess an employee to tax where the evidence shows that there is in fact a single employment. If necessary, we will defend such an assessment in formal appeal proceedings.
We take the view that a dual contract arrangement is unlikely to work unless there are two distinguishable jobs. For example, a French resident employer ‘A’ sends employee ‘B’ who is domiciled outside the UK to establish an office in London for its UK subsidiary ‘C’. A requires B to work in its Paris office servicing their existing portfolio of French clients two days per week. On the other three days, C requires B to work in London. This is likely to constitute a proper basis for B holding separate employment contracts with A and C.
In order to decide whether the arrangements create two employments, rather than artificially divide a single employment for tax purposes, it is appropriate to look at the economic advantage that an employer gains from the employee’s activity. If the contractual arrangements are to have any meaning, they must be seen in the context of the underlying commerciality of the arrangements. Regardless of there being two written contracts, we would not accept that there were two employments if the risks and rewards relating to work done in the UK and overseas were in fact substantially borne and received by a single employer. Moreover, an arrangement requiring a written contract between an employee and a UK employer which provides only for the performance of duties in the UK would appear artificial if the employer’s business extends outside the UK.
An employer’s interest does not lie in having the employee work in a defined geographical area but in an economic activity that benefits the employer. An employee may perform duties overseas that directly benefit the business of the UK employer. When performing those duties, the employee is not working for the overseas employer but for the UK employer overseas. If the arrangement were genuine, the employee would not be paid by the overseas employer to work for the UK employer overseas. If that is what the contract requires, it would indicate a lack of commerciality. Conversely, an employee who performs duties in the UK that directly benefit the business of the overseas employer is working for the overseas employer in the UK. It is difficult to imagine circumstances in which contracts that can require an employee to work for the benefit of a UK employer whilst being paid by an overseas employer or vice versa would be offered by employers that were not associated.
Various mechanisms exist for allocating costs to another entity that benefits from an employee’s services. These include transfer pricing adjustments. It has been suggested that such adjustments restore the commercial equilibrium and thus support the existence of separate employments. We do not find this persuasive. The fact that such adjustments are necessary indicates that the employer has misjudged the commercial reality of the arrangements. Separate employers do not for sensible commercial reasons pay employees to work for someone else, with or without transfer pricing.
Dual contract arrangements are sometimes used when a UK resident employee holding one employment with worldwide duties first becomes ordinarily resident. We have also seen cases involving individuals who are self employed before they arrive in the UK but become employees with dual contract arrangements on attaining UK resident and ordinarily resident status without any significant change in the way in which they carry out their professional activities. In other cases, recruitment material suggests that the employer has a single vacancy to fill and a dual contract arrangement is only implemented following the appointment of a non-domiciled individual. In such scenarios, we would aim to test whether the facts reflect commercial reality.
Overseas contracts and UK duties.
Where the commercial reality shows the existence of separate employment contracts, it is sometimes argued that contractual terms that prohibit the performance in the UK of duties connected with the business of the overseas employer, preclude the Revenue from arguing that the employee has performed duties of the overseas employment in the UK. These arguments are based on the UK duties being “ultra vires”.
We do not consider that the presence of such clauses means that we should ignore the performance of duties in the UK that clearly benefit the overseas employer. To that end, both employers ought to be closely monitoring the employee’s UK activities. For example, where the employee has performed substantive duties in the UK that directly benefit the overseas employer, we would expect the UK employer to mark the fact that the employee is effectively abusing its time and take appropriate disciplinary action. And if the UK work in question was valuable, we would not expect the overseas employer to take it into account when calculating bonus entitlement. We think that clauses like this are frequently waived or ignored and may be inserted to create a misleading impression.
Tax impact where dual contract arrangements fail.
Where the facts indicate that there is, in commercial reality, only one employment contract whereby the employee performs duties for the benefit of one employer both in and outside the UK, all of the employee’s general earnings will be taxable under section 21 ITEPA. As earnings attributable to overseas duties will not be chargeable overseas earnings, tax will be charged on receipt rather than on remittance to the UK. The identity of the “employer” will depend on all the facts and circumstances of the individual case. However, the UK entity that receives the benefit of an individual’s services will be obliged to apply PAYE to all payments of PAYE income made to the employee during the period that the employee works for that entity. This is because the UK entity will either be the employer or (for the purposes of section 689 ITEPA) the relevant person.
If there are genuine separate employments but the employee has performed substantive duties in the UK for the overseas employer, then all earnings from the overseas contract will be taxable under section 21 in the relevant year. They will not qualify as chargeable overseas earnings under section 22 because the duties of employment with a foreign employer will not have been performed wholly outside the UK in the year in question. There is unlikely to be an obligation to operate PAYE on earnings from the foreign employer, as that employer will not have the necessary presence in the UK for PAYE purposes, and the UK employer will not be the relevant person in relation to duties performed by the employee under the separate overseas employment.
National Insurance.
Where for tax purposes the facts indicate that despite the existence of two written employment contracts, there is a single employment covering UK and overseas duties, there could also be National Insurance consequences. If it is found that the earnings relating to overseas duties are attributable to employment with the UK employer, there will be liability to pay further National Insurance.
miscellaneous.
Employment-related securities and options - Form 42 for year to 5 April 2005.
A copy of the information return Form 42 to be used for the year to 5 April 2005. This is the form on which companies need to tell us about employment-related shares and securities. Details of the events that have to be reported can also be found there. Only those sections of the form where there is something to report, and the declaration in Section 7, have to be completed.
Companies can continue to use a substitute form provided it is in the same format and provides the same information requested by Form 42. Companies incorporated in the year ended 5 April 2005 that have issued unrestricted shares only need to complete sections 5 and 7 of Form 42. We have also provided on this website, a simple form for these companies to use.
Form 42 will only be issued to companies where we think that there are likely to be reportable events. In such cases we will issue the form on or after 6 April 2005. If a company is issued with the form it must complete the form and send it back by 6 July 2005. Where a company is issued with the form and has nothing to report it must make a ‘Nil’ return by ticking the box in Section 6, signing the declaration in Section 7 and returning the form by 6 July 2005. Failure to do this may lead to penalties being imposed.
Where a form 42 is not issued to a company, it must still tell us about any reportable events by 6 July 2005. A copy of the form can be downloaded from the website to use for this purpose. Failure to tell us about reportable events within the time limits may lead to penalties being imposed. Companies do not have to make a ‘Nil’ return where they have not been issued with a form 42 and there are no reportable events.
Detailed guidance to help companies complete the form is also available.
If you have any enquiries about Form 42 or how to complete it you can e-mail us at.
Recognised Stock Exchanges.
Please note this article replaces the article entitled Recognised Stock Exchanges Overseas in Tax Bulletin Issue 40.
The phrase “recognised stock exchange” occurs throughout the Taxes Acts and in various regulations.
The definition of a recognised stock exchange is at Section 841 ICTA 1988. It includes the London Stock Exchange and any such stock exchange outside the UK as is designated by an Order of the Board of the Inland Revenue.
The list of recognised stock exchanges in Tax Bulletin 40 is no longer up to date. The current list of recognised stock exchanges is available.
Please note that recognition under Section 841 ICTA is for income tax, corporation tax, capital gains tax and, to a limited extent, SDRT purposes only. Section 841 does not extend to Inheritance Tax, although, in practice, an exchange under section 841 will also be regarded as recognised for the purposes of Inheritance Tax. Recognition for these tax purposes does not imply recognition or approval for regulatory or other purposes.
Amendment to an article in Tax Bulletin 70.
EU Enlargement and NICs.
The telephone number for the Centre for Non-Residents (CNR) has now changed. The new number is for calls from outside the UK: dial the international code then:
The link to the Home Office website as shown, no longer works. You should check the Home Office’s website if you require further details on the new workers registration scheme.
Inland Revenue Statements of Practice and Extra-Statutory Concessions issued between 01/02/2005 to 31/03/2005.
Extra Statutory Concessions.
There have been no Extra Statutory Concessions for this period.
There have been no Statements of Practice for this period.
You can get copies of SPs and ESCs by telephoning Chandra Chandramohan, on 020 7147 2363 .
The content of Tax Bulletin gives the views of our technical specialists on particular issues. The information published is reported because it may be of interest to tax practitioners. Publication will be six times a year, and include a cumulative index issued on an annual basis.
You can expect that interpretations of the law contained in the Bulletin will normally be applied in relevant cases, but this is subject to a number of qualifications.
Particular cases may turn on their own facts, or context, and because every possible situation cannot be covered, there may be circumstances in which the interpretation given here will not apply.
There may also be circumstances in which the Board would find it necessary to argue for a different interpretation in appeal proceedings.
The Bulletin does not replace formal Statements of Practice.
The Board’s view of the law may change in the future. Readers will be notified of any changes in future editions.
All the names referred to in this Bulletin are imaginary and have no relation to real persons, living or dead, except by coincidence.
Nothing in this Bulletin affects a taxpayer’s right of appeal on any point.
Letters on any article appearing in Tax Bulletin should be sent to the Editor, Mr Shell Makwana, Room 2c/09, 1 Parliament Street, London, SW1A 2BQ or e-mail.
We are sorry though that neither he nor our contributors will normally be able to enter into correspondence about Tax Bulletin or its contents.
Inscrição.
The subscription for 2005 is £22. If you would like to subscribe to Tax Bulletin please send your name and address together with your cheque to Inland Revenue, Finance Division, Barrington Road, Worthing, West Sussex BN12 4XH. Cheques should be crossed and made payable to “Inland Revenue”.
If you would like information regarding Tax Bulletin subscription or distribution please contact Mrs Sylvia Brown, Room 2/38, 1 Parliament Street, London, SW1A 2BQ. Telephone: 020 7147 2335. Or E-mail.
For more general information regarding Tax Bulletin, please contact Mrs Jayne Harler, Assistant Editor, Room 2/38,
1 Parliament Street, London, SW1A 2BQ on 020 7147 2317. Or E-mail.
Tax Bulletin is covered by Crown Copyright. There is no objection to firms copying the Bulletin for their own use. Anyone wishing to republish Tax Bulletin or extracts more widely should write for permission to Miss Glenda Bishop, Room G12, New Wing, Somerset House, Strand, London, WC2R 1LB.
2: Capital Gains Manual CG16600.
3 TCGA92/s17, s18 & s286.
4 Employment Income Manual EIM00700.
5 Employment Income Manual EIM21660.
6 Employment Income Manual EIM21102 and EIM21120.
7 Company Taxation Manual CT1529.
8 ICTA88/s1B & s20.
9 ICTA88/s13AB, inlandrevenue. gov. uk/news/ncdr. pdf.
10 Company Taxation Manual CT1529a.
11 Corporate Intangibles Research and Development Manual CIRD11680.
12 FA02/SCH29/PARA92 & Corporate Intangibles Research and Development Manual CIRD45010.
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