J.W. DUFFY & Co. Based in Chiswick, London, United Kingdom

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Rich homeowners flee taxes

One in five sales of homes worth more than £1m is being driven by the desire of wealthy owners to move their assets abroad amid fears of future tax hikes, the Sunday Times reported.

Estate agents believe that about 20% of properties at the top end of the market — valued at £1.3m and above — are being put on the market by clients who want to 'downsize' in Britain and concentrate their resources on larger homes overseas.

According to the Times article, the trend partly reflects concern among the high earners that Gordon Brown, the Chancellor, could raise levies such as inheritance tax after the next general election. It comes in the wake of government plans to close a number of tax loopholes.

The prospect of losing high value assets — and a potential source of revenue — will be a blow to ministers.

Almost 1,800 homes worth more than £1m were sold in the first six months of this year, according to Land Registry records, which means that up to 360 British homeowners may have gone offshore.
This Halifax, the country's biggest mortgage lender, said that house prices fell across Britain last month for the first time in almost two years, fuelling speculation that the housing boom has turned. The average house price is now £165,565.

Domicile, ordinary residence and residence are the main determinants of liability to UK tax. The issues are complex and the rules are under review.

Basically a person's domicile is the country that the individual regards as his or her natural home. Each person has only one domicile which is normally, but not always the country of birth; it can be changed, usually with some difficulty.

Ordinary residence is the country where a person normally lives or makes habitual visits, ie visits of three months or more a year over four consecutive years.

Residence in the UK is normally established by someone who visits the UK for at least six months in any one tax year, or three months a year over four consecutive years.

UK residents pay tax under Sch D Cases IV and V on income from overseas trades, professions, property and investments. Income is calculated similarly to UK income. UK residents who are non-UK domiciled or are UK or Eire citizens not ordinarily resident in the UK, pay tax only on income brought into the UK (remittance basis).

Employees who are UK resident and ordinarily resident pay tax under the earnings rules on their remuneration wherever the duties of their employment are carried out. Employees who are not ordinarily resident in the UK, and UK resident non-domiciled employees working wholly abroad for a non-resident employer, pay tax on their overseas remuneration on the remittance basis.

Non-UK residents are not normally liable to UK tax on overseas income.

Non-UK residents generally pay tax on their UK income.

Tax may be deducted at source from property income. Only certain non-residents are entitled to personal allowances. They include all Commonwealth citizens, all nationals of European Union states, Norway, Iceland and Liechtenstein and all residents of the Channel Islands and Isle of Man.

The UK income tax liability of a non-resident is subject to an upper limit. The calculation is complex but the broad effect is that no tax is charged on UK bank and building society interest and state pensions paid to non-residents provided they do not claim any personal allowances.

For assistance in this highly specialised area please talk to us.

UK Tax Investigations and Enquiries

Being investigated by the Inland Revenue is extremely serious. A major enquiry can seriously disrupt your business, while a self assessment personal tax investigation can be prolonged, detailed and intrusive.

If you have deliberately tried to conceal information and are found out, you could be fined or even sent to prison.

Most tax investigations begin because the Revenue has reason to believe that some aspect of your tax return or business accounts is wrong.

They may have received a tip off, some figures in the tax return may not tally with other information they have, or the return may have been sent in late.

The Revenue also randomly selects a proportion of tax returns every year.

In the first two years of self-assessment, some 15,000 returns were investigated.

The Revenue will write to you to let you know that your affairs are being investigated although it will not normally give the reason behind its decision to launch an enquiry.

Under the self-assessment regime, the Revenue must start any enquiry within 12 months of the last filing date of 31 January but there is no requirement for an investigation to conclude within a fixed period of time. Some enquiries can last more than two years.

Most investigations are handled by local tax office inspectors with specialist training and experience. They know what to look for and are well versed in the excuses trotted out by wayward taxpayers who have underpaid their tax.

Whatever happens, taxpayers' affairs will be dealt with confidentially and information will only be disclosed to people that the individual agrees it may be given to, such as ourselves or other adviser.

The Revenue can, however, ask former employers, customers, suppliers or colleagues for information relating to its investigation.

The taxman is not required to give reasons for the enquiries it makes but it can identify areas that it wants to delve into.

If the problem appears to be a simple one of omission, it can ask taxpayers to answer specific questions or provide documents that might answer the question.

If it is discovered that tax has been underpaid, the taxpayer will have to pay what is due plus any penalty or interest accrued.

In serious cases of fraud, the Special Compliance Office can be involved. This is the Revenue's elite unit responsible for the most high-profile investigations.

Celebrity is no bar to investigation. The SCO has the power to negotiate settlements and can also agree not to prosecute a taxpayer as long as full disclosure is made.

In cases where minor amounts of income have been undeclared or where small mistakes have been made on the return, normally the matter can be cleared up with a few phone calls and submission of relevant pay slips.

But where serious fraud (amounts of more than £50,000) is concerned, the Revenue can start to request information from banks, accountants and other parties if it is the tax inspector's "reasonable opinion" that this will help the investigation.

Individuals with complex tax affairs or with a business to run may well find it easier to to use ourselves to guide them through the process and minimise the disruption to their activities.

Prosecutions and the penalties can be severe including jail sentences and stiff fines designed to recoup the unpaid tax and penalties.

It is also possible to buy insurance to pre-empt the costs of a tax investigation.

These are the three Golden Rules of Marketing – the foundations of your business success.

If your answer to any of these questions is ‘no’ – don’t worry – you’re not alone. But experience tells us that if you are willing to apply these principles to your business, you will see your profits increase significantly.

1. Do you Test and Measure every aspect of your Marketing?
Being outstanding at marketing is fairly straightforward – but so few businesses do it. You just need to continually test new marketing strategies on a small scale. It may be a new direct mail campaign, a new ad, a letter to your customers, an email, a new headline on your website, a two week telephone campaign. You test small, then you measure the results. What did it cost? What revenue did it generate? If it was not profitable, you’ve learnt an important lesson and move on. If it was profitable, you roll it out and make it an integral part of your marketing mix.

If you tested five new things every month and just one out of the five was successful (if you use our marketing strategies it’s more likely to be four out of five) then at the end of a year you would have twelve new proven marketing strategies to add to your mix. So testing and measuring all of your marketing is the first golden rule of Marketing.

Of course, before you test new marketing approaches, you need to be testing and measuring what you are already doing. For example, the number of businesses who advertise and have never accurately measured the response and therefore don't know if the ads work - is scary.

If you're going to be great at Marketing, you must, must test and measure everything.

2. Are you clear what the purpose of your business is?
Outstanding business performers share a similar way of thinking about business. The highest purpose of their business is not to just make money or increase profits. The highest purpose of their business is to add real value to the lives of their customers or clients.

We’re not talking about some vague concept of adding value. We’re talking about a deep commitment to enhance the lives of those you interact with. Why is this so important? It is the single most effective sales tool any business can employ. If you call a company and they just want to make money from you, you can tell instantly can’t you? But if you call a company and they’re willing to do whatever it takes to make your life easier, solve your problems, meet your needs and answer your questions – don’t you just love it?

When we stop obsessing about how great our product or service is, and start obsessing about adding enormous value to the lives of our customers and clients – our profits soar - and as an added bonus, doing business becomes much more pleasurable.

3. Is your marketing continually focused on explaining the BENEFITS of your product or service?
One of the biggest marketing mistakes that businesses make is focusing on the details of their product or service, rather than the benefits it offers customers.

People will only buy from you when they, either consciously or sub consciously understand how they are going to benefit from what you are offering them.

Every conversation you have and every paragraph of your brochures, letters and website should convey the benefits of what you have to offer. Of course, for this to happen YOU have to be clear on what these benefits are. Sometimes, we’re so close to our business that’s not such an easy question to answer. Ask some of your colleagues what the top three benefits of your product are. If they hesitate – you’ve identified the first area where you can make a significant difference to your marketing.

Customs & Excise has frozen up to 70 prosecutions for alleged VAT fraud - the largest involving a £162 million swindle on the British taxpayer - amid claims that it withheld vital documents from defendants.

The revelation is a serious embarrassment for the organisation, which is being merged with the Inland Revenue.

The stalled prosecutions relate to alleged VAT frauds involving mobile phones and computer chips and related actions for money laundering between 1993 and July this year.

In the past five years alone, £2 billion a year in VAT has been lost because of these scams.

They exploit a loophole in the European Single Market rules, where VAT is paid only on trades inside EU countries but not on trades between them.

The fraud has focused on highvalue goods that are easy to move - such as computer chips - and occurs when a company imports goods VAT-free from elsewhere in Europe, then sells them on in Britain, charging VAT.

Normally this tax should be passed to Customs within three months, but fraudsters are usually long gone by that time.

In some cases, the goods end up going between the same companies in the UK and Europe, each time collecting more VAT.

Among the cases that Customs has suspended is the prosecution of Irish entrepreneur Dylan Creaven, a former director of computer components company Silicon Technologies Europe.

Creaven, arrested in 2002, has been accused of committing the largest VAT fraud yet, involving the loss of £162 million to the taxpayer. He denies the charges.

The review appears to have been prompted by the late disclosure of material by Customs in several prosecutions.

And defence lawyers have also alleged that some evidence was being deliberately withheld.

Documents reveal that Customs has no central record-keeping in relation to its prosecutions and the organisation admits 'some documents will be missed'.

The existence of the review was revealed in court last month, a day after Mike Eland, the acting chairman of Customs & Excise, and John Healey, the Economic Secretary to the Treasury, appeared before the Treasury Select Committee.

Despite being questioned about VAT fraud, neither told MPs about the decision to review all prosecutions - a process that is likely to take until the early part of next year.

Prosecutions are expected to be revived shortly after that.
A Customs spokesman confirmed that the review was under way but said that VAT fraud remained 'a top priority.'