US Citizens owning UK companies and dividends overview

20 April 2018 • US Tax returns

US Citizens owning UK companies and dividends overview

On 22 December 2017, President Trump signed into law major tax changes that will affect almost all US citizens that own an interest in a UK company.

Our dedicated US tax team have set out below the key points that US shareholders need to know:

  • Repatriation tax of between 15.5%-18% of Earnings & Profits generated between 1986 and 31 December 2017 not distributed by the company as a one-off tax based on 31 December 2017 accounts and the shareholder’s actual rate of tax.
  • The repatriation tax is a tax on the shareholder, and therefore for individuals owning shares in a UK company it is a personal tax on the US citizen and not a corporate responsibility.
  • Removal of eligibility for receiving a qualified dividend which is taxed at low tax rates from 31 December 2017.
  • The repatriation tax can be paid in instalments over 8 years as follows:
    • Years 1 to 5 - 8%
    • Year 6 - 15%
    • Year 7 - 20%
    • Year 8 - 25%
  • The first repatriation tax instalment is due on 15 June 2018 and then on 15 April thereafter.
  • The changes to the qualified dividend rules will likely result in an increased US liability for US Citizens.
  • US shareholders will need to change their profit extraction policy in 2018 and beyond.  There is no standard solution, every US individual will need bespoke advice and change the way in which they extract profits from their UK companies.

Our comments

There has been a huge out cry from the expat tax community regarding both the business and legality of the new rules.  It is entirely possible that there will be future changes and interpretations that will occur. However, we need to assume the legislation is here to stay.

We suspect some US individuals will need to take extreme measures such as expatriating from the US or closing and re-opening companies but for most US Individuals these extreme measures may not be necessary.

Please do contact our specialist US tax advisors if you would like our help in coming to terms with the changes, call us on 020 7731 6163.

A review of the changes introduced for the new tax year 2018/2019

17 April 2018 • HMRC News

If you cast your mind back to last March when Chancellor Philip Hammond delivered his Spring Budget, you may recall he made changes to various tax allowances which have now come into effect. Our tax team have highlighted the main changes that may affect you and your business.

Personal Allowance

This year, most tax payers will see an increase in their personal allowance; the basic rate of 20% has risen from £11,500 to £11,850, whilst the higher rate threshold has increased from £45,000 to £46,350.

The point at which higher earners lose their personal allowance entirely has also increased in line with the higher personal allowance.

Class 4 NIC Increase

For anyone self-employed, there is now have a higher threshold for Class 4 NIC’s which sees the income level at which you must pay this class of national insurance increase from £8,164 to £8,424.

Dividend Allowance

From this April, the dividend allowance is dropping from £5,000 to £2,000, allowing shareholders to receive only £2,000 per year as a dividend before paying tax.

Auto Enrolment

For those with employees, several of the new changes introduced include the rise in the living wage to £7.83 and auto enrolment may mean higher costs for your business.

The Government has raised the statutory contribution you as an employer must make to each employees’ pension fund from 1% to 2%. You may also want to factor in that this will increase again to 3% in 2019.

If you want to discuss how these of any of the above might affect you or your business, please do not hesitate to contact one of our tax specialists on 020 7731 6163.

Highlights from the Spring Statement

14 March 2018 • HMRC News

Philip Hammond’s new style of Spring Statement was aimed at making a statement on the health of the economy and not as a forum to announce tax changes or spending announcements. Mr Hammond was keen to stress that the economy had performed better than expected, with a predicted growth of 1.5%, plus the expected reduction in inflation during the coming year should produce real wage growth in 2018/19.

Following his speech yesterday, our tax team here at Warrener Stewart has analysed the information to share any points of interest that might affect SME business owners. Most notably, he used the Spring Statement to announce bringing forward the introduction of the next business rates valuation to 2021, plus assistance to increase production in small businesses. He also spoke about measures designed to eliminate late payment, certainly a welcome intervention for many business owners in light of recent failings like Carillion.

Rather than announcing tax changes the Chancellor did announce the start of several consultation documents to help shape future taxes. Amongst these is the consultation on reducing tax on the least polluting vans, and ways to tackle single use plastic waste. There is also going to be a consultation on the role of cash within our ever-growing digital economy, including looking at continuing with 1p and 2p coins, and £50 notes.

The Chancellor has asked business owners to share their views on whether the £85,000 VAT registration threshold is helping them or creating a burden. Likewise, the government is keen to know what business owners think about their revisions to their proposals on corporate tax for the digital economy. They will also be holding a series of collaborative workshops to review alternative methods of VAT collection.

Commenting on the Spring Statement, Warrener Stewart’s tax director Ryan Lane said; “The main purpose of the Statement seems to have been a reassurance to the country that we are on track and to engage with businesses on their future via the many consultations they announced.”

Surviving the traditional self-assessment tax return rush in January

15 February 2018 • Warrener Stewart News

Fulham based chartered tax advisors, Warrener Stewart’s tax team take time out after a busy January. Over the last four years, private client services have grown steadily, through the teams hard work the number of tax returns filed this year increased by 10% compared to last year.  

Commenting on the team efforts, tax director Ryan Lane explained, “As part of our private client services we provide advice to business owners and individuals regarding their personal tax affairs, which includes the preparation of their annual self-assessment tax return.

“January was an incredibly busy month for us with just over half the tax returns we assist clients with, completed and filed in the last four weeks before the deadline on 31 January. My fellow directors and I are very proud of the hard work that all our teams have put in over the year to ensure that our clients meet their filing obligations with HMRC.”

Wishing you a very Merry Christmas

18 December 2017 •

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The offices will be closed during the Christmas week until 2nd January 2018. 

We hope you have a prosperous New Year.

This year instead of sending cards we have made a donation to St Mungo's, who work to tackle the causes of homelessness.

Warrener Stewart continues to grow

02 November 2017 • Warrener Stewart News

The current economic climate has not deterred five young professionals choosing accountancy as a career and joining chartered accountants in Fulham, Warrener Stewart. As chartered accountants and chartered tax advisors, Warrener Stewart specialises in meeting the needs of small and medium sized business, helping them to fulfil their business potential. The five new starters specifically choose Warrener Stewart because they wanted the opportunity to work with SMEs from a variety of sectors.

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Pictured above are (left to right): Fo Uwhubetine, Demi Brindley, Victoria Ikudehinbu, Alex Hollomby, Ali Dessain.

Joining the Audit and accountancy team are Ali Dessain, Demi Brindley and Fo Uwhubetine. For recent history graduate Ali, this is his first stepping stone towards a career in accountancy, following his graduation from Trinity College in Dublin. Whilst for Demi, having completed her AAT qualification in 2013, she has also chosen to continue her career as a Chartered Accountancy trainee and study for her ACA Qualification at Warrener Stewart. Likewise, Fo, having studied Accountancy and Financial Management whilst at the University of Hull, is keen to progress her career in business whilst training with Warrener Stewart.

Warrener Stewart’s Tax department has grown steadily over the past five years, providing advice to both businesses and their owners on UK and international tax issues. It was this diverse nature of the Tax department which attracted Accounting and Finance graduate, Victoria Ikudehinbu to join the team so she could expand her career in US tax and continue to study to become an Enrolled Agent alongside her ATT exams. As a recent Classics graduate, Alex Hollomby has chosen to put his attention to detail to good use by launching himself into a career in tax.

“In the current economic climate our clients are relying upon us more and more for business and tax advice. Through our recent recruitment we can continue to grow and maintain a high level of service to our clients,” commented Colin Edney, joint managing director of Warrener Stewart. 

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