PriceWaterhouseCoopers (PwC) contrived a
tax avoidance plan, which the Court of Appeal threw out in July 2012. The plan
depended on PwC’s client becoming non-resident in the UK by moving to Spain for five
years, thereby no longer being liable to Capital Gains Tax in the UK.
The way
the tax plan worked goes something like this: Mr.H., by his commercial
astuteness, incurred a taxable capital gain in excess of £10m in the tax year
2002-03.
To explain in words:
·
On 31st December
2002 H incurs a £10m capital gain that he wants to dodge in the tax year
2002-03. So he consults PwC on how to legally reduce his tax liability.
·
In February 2003, with the end
of the tax year approaching, PwC sell him a plan:
o On 29th March 2003, H moves to Spain. He remains outside
the UK for tax purposes for the next 5 years.
o H enters into four transactions with a bank.
o On 4th April 2003 two of the transactions are completed
resulting in H owing the bank £10m. This is in the tax year 2002-03
o On 7th April 2003 the remaining two of the transactions
are completed resulting in the bank owing H £10m. This is in the tax year
2003-04
·
Overall, Mr H and the bank owe
each other the same amount, and so are quits.
·
But Mr.H’s £10m loss is in tax
year 2002-03, and so PwC claimed he could write it off against his original
£10m capital gain made in December 2002
·
And Mr.H’s £10m gain in tax
year 2003-04 is when he was ‘non resident for tax purposes’, and so PwC claimed
he was not liable to capital gains tax.
Being
"non-resident for tax purposes" doesn't mean giving up pub lunches and
grey skies entirely. So long as you aren't in the UK more than 183 days
in a tax year, nor for an average of more than 91 days over 4 years,
then you are non-resident as far as HMRC is concerned.
Which is fine for those who can afford a second home overseas and don't
have to turn up to in a UK office or factory every day.
This tax dodge was thrown out by the High Court in July 2012
ReplyDeletehttp://clients.squareeye.net/uploads/pump/documents/Schofield%20v%20HMRC%20APPROVED%20Judgment.pdf
PWC, the accountants who promoted this dodge, issued a statement:
“PwC provides tax advice to a wide range of clients with a wide range of commercial circumstances. That advice is always provided in accordance with the law and with appropriate disclosure to tax authorities.
“We aim to provide balanced, informed advice which takes into account not only current tax legislation but also current practice and case law."
http://www.accountingweb.co.uk/article/schofield-decision-sinks-pwc-scheme/529899