Both the UK and USA have had the biggest collection of taxes in history for the month of January 2017.
This is not because the public are earning more money either!
In the USA, according to http://www.breitbart.com/big-government/2017/02/13/record-tax-collected-january/, American workers paid out record levels of federal tax in January, with the U.S. Treasury collecting over $1 trillion between October 1st to January 31st, the opening months of 2017 tax year.
In the UK, according to http://www.international-adviser.com/news/1034366/uk-tax, HMRC increased their revenue by 14% in comparison to January 2016.
This is due to the fact that we are having to report more and everyone's monetary position is become more transparent. With FATCA and CRS in force, we are having to be more open with where we live, where we earn and where we hold our assets. Gone are the days when you can disconnect personal ownership of assets for tax purposes alone. You can mitigate or remove certain taxes with planning but it should not be the main reason for taking action.
Is everyone paying attention to changes?
When we hear about tax changes, we tend to focus on how they would affect us immediately, but if the asset being taxed is elsewhere, we tend not to pay too much attention.
A classic example is the London property investment market. People are still buying properties in the UK, for investment, despite HMRC introducing new taxes to ownership. This includes an additional stamp duty of 3%, if you are buying as a rental income asset. Capital gains tax, when you sell the property, the increase in value from the time you start to the date you sell is taxed at 18% or 28%, depending upon your income in UK at the time. IHT will now be payable on any asset in the UK, even if you never step foot in there. If you have an off-shore company or Trust ownership, if the asset is in the UK, HMRC will have the right to tax it when the "beneficial owner" dies. This is 40% of any value above GBP325,000, which is not a huge allowance.
As soon as a Brit returns to UK as a resident, they now become re-Domicile. This affects your global assets and not just the ones in UK. Even if you sell a property overseas, but also have a home in UK, the asset you sell is subject to Capital Gains taxes. Imagine owning a home in UK of around GBP500,000 and one in HK of around HK$10,000,000 (bought for HK$6,000,000.) When you sell the HK property, if you are resident back in UK, the capital gains tax would be on HK$4,000,000- this could be as high as HK$1,120,000.
You can become non-resident after 4 years of leaving the UK but Domicile is much harder to remove. Even if you have acquired a Domicile of Choice, say in HK, should you decide to retire elsewhere, you become re-Domicile automatically. All of this changes your global status on tax. 40% would be payable on global assets above GBP325,000.
Many people ask me "how would they know?" Even if you lived in a cave in the mountains, your family have to complete many forms to ascertain your assets for the relevant tax man when you die. You cannot expect them to not tell the authorities - they could go to jail for lying. Taxes are charged on your estate, not a person, generally when you pass away. Your loved ones would have to pay the bill before the release of assets in most instances. They cannot sell a house to pay the bill if the assets are in your name, in other words.
Due to FATCA and CRS, many countries are creating a uniform of tax collections - they are following each other with the forefront being both the UK and USA.
You should review your asset holdings and structure your estate, not only to help reduce taxes but also to make sure that the right people inherit the right assets at the right time. Estate and Succession Planning are imperative for your loved ones as without direction and instruction, it could take a long time to distribute your assets.
Please feel free to contact me for a review or update of your existing arrangements. You are under no obligation.