Tag Archives: United Kingdom

Program Brings Young Entrepreneurs To The UK

Nineteen young entrepreneurs from 13 countries have become the first batch of applicants to come to the UK to set up businesses as part of the Government’s new Sirius Programme.

The scheme, which is run by UK Trade & Investment, recognizes graduates with innovative start-up ideas,

London Big Benand aims to attract hundreds of talented entrepreneurs into the UK in its first two years. Successful teams receive start-up support including a 12 month place on one of the best business accelerator programmes; mentoring; help gaining clients; financial support of GBP12,000 per team member; and a visa endorsement. Enterprises remain completely owned by the graduate teams, and no equity is taken.

The first round of the scheme attracted 160 applicants. Winners came from countries including Canada, China, Germany, India, Italy, Kenya, New Zealand, and Nigeria, and they will launch businesses in the sport, energy and health technology sectors. Winning ideas included green energy from waste coffee ground; a low-cost smartphone battery charging solution; and a device for enabling consumers to instantly verify whether a branded product is counterfeit via their mobile phone.

Big Ben, London. Picture courtesy of Doco, Wiki Commons.

The Government believes that the scheme will create new jobs, promote foreign investment and have “a significant cumulative impact” on the economy. It adds that businesses based in the UK have access to 500m customers across Europe, and that these customers tend to be “early adopters” of innovative technology.

Minister of State for Trade and Investment Lord Livingston said that the UK “is fast becoming the country of choice for talented graduates to start and grow their businesses.”

The Sirius Programme is open for entries in January 2014.


UK gives big tax breaks to creative high tech industries

In aiming to establish the UK as the technology centre of Europe, the government hopes that the tax breaks will support technological innovation and ensure that creative industries continue to contribute to economic growth.

The UK’s creative industries are set to benefit from new “world class tax breaks” unveiled by Chancellor of the Exchequer George Osborne in a move designed to encourage innovation and investment.

According to Osborne, the reliefs will be among the most generous in the world, and will build on the success of the UK’s existing Film Tax Relief. The government is now consulting on plans announced in Osborne’s 2012 Budget, which outlined proposals for tax reliefs targeted at animation, high-end television and video games.

Subject to European Union State aid approval, these corporate tax reliefs will enter into force from April, 2013. The government is keen to repeat the boost generated for the film industry, where tax reliefs provided around GBP 95m (USD 150m) of support and helped over GBP 1bn of investment in 208 films in 2009/10.

The consultation invites views from individuals, companies, and representative and professional bodies on the proposed design options. In particular, the government wishes to hear from production companies and those working directly in the production of video games, animation and high-end television.

A separate consultation on the design of suitable cultural tests for each of these reliefs will be launched in the autumn. The tests will identify culturally British works that are to be considered eligible for the new tax reliefs in line with the European Commission’s rules on State aid. In the meantime, discussions will continue with industry-focused working groups and the European Commission.

Osborne explained the government’s initiative: “I want the UK to remain a world leader in the creative industries, that’s why I am announcing tax reliefs that will be among the most generous available anywhere. High-end TV, animation and video games production are exactly the kind of innovative, high-tech industries at which this country excels, and the government is determined to support them as part of our efforts to grow this economy.”

Reacting to the news, Rachel Austin, Deloitte tax director, said: “The aim of the proposed relief to support a sustainable creative industry with a world class skills and talent base in the UK will be welcomed by the industry. However, given the long lead time for productions in these sectors, companies need to know the value of the proposed reliefs as soon as possible to start building it into their planning processes. If the government sets the rate of relief at the right level, the proposals will increase the UK’s competitiveness in these sectors encouraging additional investment in the UK and discouraging UK companies from producing culturally British content in countries that already offer incentives such as Ireland, Hungary and France.”

The consultation remains open until September 10, and the government will publish draft legislation for further consultation in the autumn.


Investors look to offshore havens to beat austerity measures

To protect pensions and legacies savers move to foreign bonds. Wealthier British investors are piling money into offshore bonds, in a bid to escape punitive new taxes on pensions, and to help with inheritance tax planning according to Emma Simon, The Telegraph.

According to L&G – one of the largest insurers in the UK – its offshore bond business grew by almost 50 per cent in the past three months. This is on top of record sales in 2010, which saw sales rise almost five times on the previous year. While Standard Life in an annual results said it had seen sales soar by a third this year.

One reason for these rises has been the recent change which has limited how much people can save into a pension each year.

But a rise in Capital Gains Tax (CGT), and a freezing of the Inheritance Tax (IHT) allowance has meant more investors are looking at ways to minimise tax charges on their investments.

People are now only able to save £50,000 a year into a pension. Danny Cox, of Hargreaves Lansdown said: “This limit is still clearly more than most people can afford to save each year. But it does mean that once high earners have maximised their pension and Isa contributions, then offshore investment bonds become an option.”So what are the advantage of going offshore? Do they allow richer investors to effectively sidestep tax?

The answer is no. Offshore bonds don’t allow you to avoid tax completely, but they can be a good way of deferring it. This can be particularly beneficial to those who are higher-rate taxpayers today, but expect to be basic-rate taxpayers when the investment is cashed in.

As well as allowing investors to choose when they pay tax, some of these bonds will also allow investors to choose whether returns are taxed as income, or capital gains. With careful tax-planning this can help them minimise overall tax bills.

In many ways offshore bonds are similar to onshore bonds. Both are basically wrappers, sold by insurers, through which consumers can invest in a range of investment funds.

They offer a wide range of externally managed investment funds – typically the same choice as people would get when investing in an Isa or unit trust. On offshore bonds there can be an even wider spread of investments, including many not widely available to UK investors.

One of the main advantages is that both offshore and onshore bonds allow customers to withdraw 5 per cent of their investment each year tax-free (although strictly speaking the tax is deferred until the bond is cashed). For retired investors and those looking to produce an income from their investment this can be an extremely attractive option.

The main difference between onshore and offshore bonds, is that with offshore, gains can roll-up tax-free – which should mean higher returns. The downside is that charges may be higher (though the charges on both on and offshore bonds are broadly similar) and that investors may not have the same protection under the Financial Services Compensation Scheme.

See more in the Telegraph here.


United Kingdom to clamp down on tax exiles

Tax exiles who emigrate overseas and wealthy people who live here but avoid British taxes by registering as ‘non-doms’ are likely to be targeted by new rules the Treasury begins consulting on today according to The Telegraph.

Wealthy foreigners who have lived in Britain for 12 or more years are already due to be charged £ 50,000 a year from next April, if they wish to retain ‘non-domiciled’ status. This enables them to avoid paying tax here on their worldwide income and gains – an option few other countries offer foreign residents.

But recent litigation has revealed confusion about when Britons who have moved overseas can legally avoid UK income, capital gains and inheritance taxes. Now leading accountants say the Treasury must modernise fiscal statutes and ensure everyone pays their fair share.

John Whiting, a director of the Chartered Institute of Taxation, said: “The rules on tax residence are jumbled and uncertain and are far from what we need for a modern tax system. The aim must be for a statutory test to give businesses and individuals certainty in this increasingly mobile world.

“A statutory test needs to make sure there is proper recognition of those who go abroad to work, who need to be outside the UK net, and clear rules that tell those who come to the UK when they will be in the UK tax net.”

Richard Mannion, a director at Smith & Williamson, pointed out: “Much of the law regarding an individual’s tax residence status in UK is based on case law that was laid down nearly 100 years ago at a time when Indian civil servants retired to live in hotels in Europe and sea captains embarked on circumnavigations that took a whole year.

“There was no concept than of airline pilots or businessmen with interests in different countries throughout the world who flew in and out of the country on a regular basis. There were few new tax cases on residence until recently, when there have been several which have captured the headlines including Mr Robert Gaines-Cooper, a jet setting businessman, and Mr Lyle Grace, an airline pilot.

“These cases have shown how ill-equipped the old case law is in terms of dealing with the modern world and they have demonstrated the need for a more modern test.”

For example, married couples should be freed from antiquated rules, said George Bull of Baker Tilly: “The Government should abolish the £55,000 IHT inter-spouse exemption limit for mixed domicile couples which is petty, unnecessary and potentially illegal under European Union law.
“It should also remove the rule which treats women married before 1974 as having their husband’s domicile. In 2011, women are not chattels.”

David Kilshaw, chair of private client advisory at KPMG in the UK, added that residency rules differ for different taxes: “For income tax, you can be non-resident in the UK if you are working abroad under a full time contract of employment for a complete tax year. You can also be non- resident if you leave the UK ‘permanently or indefinitely’.

“Capital gains tax is more difficult as this requires at least five complete tax years out of the UK. If an individual returns to the UK within the five tax years following departure some capital gains made in this period become chargeable to tax in the year of return to the UK.

“But domicile – not residence – is the determining factor when considering inheritance tax. Domicile is governed by general law and there are special provisions that deem an individual to be domiciled in the UK for inheritance tax purposes where they have been resident in the UK for at least 17 out of the last 20 tax years.” See the full story in The Telegraph.


Libya’s hidden wealth

According to The New York Times “As the battle for Libya rages on, the struggle over control of the country’s sovereign wealth fund and its $70 billion in assets has just begun.

The fund’s nominal head is Muhammad H. Layas, perhaps Libya’s most experienced international banker. He has had a leadership role in institutions including the Libyan Arab Foreign Bank, the only bank allowed to conduct international business during the imposition of United Nations sanctions against Libya; British-Arab Commercial Bank, a London-based wholesale bank now majority owned by Libya; and the Arab Banking Corporation, a Bahrain-based bank also majority controlled by Libya.”

See the full story in The New York Times here.