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UK To Set Up Central Tax Register
http://www.ft.com/cms/s/0/4cc97bdc-d50f-11e2-9302-00144feab7de.html#ixzz2X2GDwrSe By George Parker, Jim Pickard and Vanessa Houlder Britain is to lead by example in its push for greater tax transparency by setting up a new central register to try to ensure that the true owners of shell companies – often located in tax havens – pay their taxes. David Cameron hopes to persuade other big economies to set up similar registers when he chairs the G8 summit in Northern Ireland next week, a move designed to recover the billions of pounds in lost revenue suffered by exchequers around the world. On Saturday he promises that Britain will set up a register – to be maintained at Companies House – which would initially be available only to relevant authorities including Revenue & Customs. Campaigners for greater tax transparency want the registers of “secretive companies in secretive locations” to be made public, but Mr Cameron told The Guardian that Britain would not go down that route for now unless other countries did the same thing. “I am sure that is where I would like to end up, but I do not want to disadvantage Britain by doing something others won’t do,” he said. “I don’t also want to give up our leverage on others by trying to make them move at the same time.” Under the changes, companies registered in Britain would come under a legal obligation to obtain and hold adequate, accurate and current information on the ultimate owner who benefits from the company. Meanwhile Mr Cameron has been told by the head of one of the UK’s Caribbean dependencies to sort out tax avoidance in the City of London before he lectures Britain’s overseas territories on the issue. The comments from Hubert Hughes, the 79-year-old first minister of Anguilla, will raise doubts over whether the prime minister will be able to achieve unanimous support for a new deal on tax evasion. Mr Cameron wants to nail the agreement ahead of next week’s G8 summit and has organised a pre-summit meeting at Lancaster House, London, on Saturday with leaders of the British Overseas Territories and Crown Dependencies Mr Hughes, speaking to the Financial Times at a Whitehall hotel, said that, although he backed the spirit of a new deal on tax evasion, the overseas territories had not been given enough time to sign up to a new multilateral deal on tax. “I’m worried about the fact that we are being accused,” said Mr Hughes. “This is very hypocritical as we are being compliant … I think the City of London needs to put itself in order. I always consider the City as the biggest money-laundering centre in the world.” Mr Hughes has written to Mr Cameron saying Anguilla was prepared “in principle” to support the multilateral convention on tax. But the letter says: “Before we are able to support this convention we have serious questions about its implementation and in particular the resourcing of such an agreement in Aguilla.” The island would only support the deal if it received assurances from the government that these concerns were resolved, he wrote. Anguilla, in the Lesser Antilles, which is just 13 miles long and has a population of 13,000, is renowned for its white sandy beaches and minimal tax rates. Mr Hughes said that his island had already signed 17 bilateral “exchange of information” agreements with other countries. His comments come after the premier of Bermuda, Craig Cannonier, warned earlier this week that he needed clarification from London before he would sign up to the convention on mutual tax assistance. This treaty would allow future talks on helping authorities, particularly in developing countries, to track down tax cheats. Within hours, however, Mr Cannonier publicly shifted his position. “Bermuda is in active discussions with the UK government over Bermuda’s concerns with some of the provisions in the proposed Multilateral Convention Agreement,” he said. “It is wrong to rule out the possibility of agreement before the G8 as implied by the headlines.” It is understood that a Foreign Office minister, Mark Simmonds, had personally telephoned Mr Cannonier within hours of his arriving at Southampton and persuaded him to reverse his earlier position. But the Bermudan prime minister said he still had concerns about “costs, security of data and treaty duplication” that needed to be addressed before he signed up. Campaigners have been putting pressure on Mr Cameron to secure agreement from the Overseas Territories, saying he risks personal embarrassment if they do not sign the treaty having raised the stakes by his public call to “get our own houses in order” before the G8 summit. The Cayman Islands told Mr Cameron last week that they were prepared to commit to joining the convention, but “looked forward to further discussions on the particulars of the convention’s extension to the Cayman Islands, as balanced with the UK’s recognition of our fiscal autonomy.” This week, the British Virgin Islands told Mr Cameron that it would commit “in principle” to joining the multilateral convention. The three Crown Dependencies – Jersey, Guernsey and the Isle of Man – have also committed. But some jurisdictions resent what they see as arrogance and neo-colonialism from Downing Street. The stakes are high with Mr Cameron wanting to come away from the G8 with an agreement over either tax or free trade, where France is blocking a comprehensive EU-US trade deal. Continue reading
Life’s Too Short To Bother With IHT Avoidance
http://www.ft.com/cms/s/0/63b73472-d36d-11e2-b3ff-00144feab7de.html#ixzz2X2FlNRb4 By Jonathan Eley Ways of avoiding it are generally not worth it How’s this for a business proposition? You invest a minimum of £25,000 into a new and unquoted company that promises to develop renewable energy projects. It is targeting an annual return of 6 per cent return, but will incur costs of up to 2.5 per cent. There’s also a 2.5 per cent initial charge, and the investment will only be accessible through a professional adviser, who doubtless will not be working for free either. Framed in those terms, it doesn’t sound particularly compelling, does it? The likely net return of 3.5 per cent is broadly comparable to the yield on the FTSE 100. Why put a fixed sum into an unquoted start-up venture with fairly stiff charges when you could put money into a tracker fund with rock-bottom costs, get the same net return just from the dividends paid by Britain’s largest and most financially secure companies, hopefully enjoy some price appreciation, and be able to sell any time you want? The answer is that money in the tracker fund would not be shielded from inheritance tax, which is the primary purpose of Albion Community Power, the product described above. Backed by Albion Ventures, once part of Close Brothers, it launches this week and aims to raise £25m from individual investors. It will be chaired by the Conservative MP Tim Yeo, a former energy minister who this week stepped aside as chairman of the Commons energy committee while allegations of influence-peddling are investigated. Albion says it has done lots of research that shows how worried people are about inheritance tax – of the 2,000 individuals it polled, 61 per cent had already taken advice about how to mitigate IHT, or planned to do so. Based on its figures, it estimates that over a million households expect to leave an average inheritance of more than £613,000. It proposes a “solution” to inheritance tax by utilising business property relief, which exempts qualifying investments from inheritance tax once they have been owned for two years or more. This is the same relief utilised by various other IHT avoidance ruses, such as shares quoted on the Alternative Investment Market, Enterprise Investment Schemes, farmland, forestry and so on. However, there’s a big snag with business property relief. It’s designed to facilitate the transfer of real businesses from one generation to another without incurring huge tax bills, or the funding of new growth companies. It’s not really intended to allow the rest of us to avoid paying tax on the accidental accumulation of housing wealth, which is what many are now effectively using it for. Many of the ventures that qualify for BPR will by definition be small and risky with a higher than average chance of failure. Their shares may not be easy to trade – or may not be traded at all – so you or your heirs might not be able to sell when you want or the price you want. In short, they are probably the sort of investment that you should be avoiding towards the end of your life. ACP has lessened the risks somewhat by focusing on renewable energy, which is backed by a myriad of government subsidies and reliefs, many of which are inflation-linked, and where it has past form – Albion Ventures says its existing renewables projects are generating returns of 11 per cent. Still, there are many other ways to avoid inheritance tax, most of which don’t involve risky investments and don’t cost much. You could set up a trust and place assets within it. This allows you to retain some control over how those assets are used while they are in the trust, because settlors are allowed to be trustees (just not beneficiaries). The assets lie outside your estate, although they are not completely exempt from tax charges. You can also make gifts out of surplus income, provided you can prove that the gifts are regular and that your everyday standard of living is not affected. Better still, you can give money away while you’re still alive. That way, you get to influence how it’s spent, enjoy the gratitude of the recipients, and get a warm glow from knowing that you are boosting the economy and facilitating the transfer of wealth and property to younger generations at a time when they most need it. There are two main snags with these approaches, though. One is that you cannot change your mind. You cannot withdraw money from a trust, nor can you ask your nephew to sell that snazzy sports car he bought with your surplus income in order to pay for your long-term care. The other is the “seven-year rule” – for larger gifts to lie completely outside your estate, you generally have to soldier on for another seven years. So whichever way you do it, avoiding IHT involves a lot of risks, uncertainties and trade-offs. That’s no coincidence. You’re not meant to avoid it. The Treasury collected £2.9bn from IHT in the 2011/12 tax year, and expects that figure to rise to £4.1bn in 2017/18 (see chart). No wonder the Conservatives, who in opposition advocated a nil-rate band of £1m, have now frozen the allowance at £325,000 until 2018, thus ensuring that more people will end up paying it. Is avoiding IHT really worth the bother? I’d say not. IHT is primarily a tax on wealth accumulated by accident, usually via an asset which is, stamp duty aside, largely untaxed elsewhere in the system. There is already a large nil-rate band and transfers between spouses are exempt. If you’re that worried about IHT, don’t wait to become a millionaire corpse: downsize and donate while you’re still alive. After all, you can’t take it with you. jonathan.eley@ft.com Continue reading
Green Fund Aims To Harvest Greenbacks
http://www.ft.com/cms/s/0/f9ec02f2-d43e-11e2-a464-00144feab7de.html#ixzz2X2FIgnpQ By Ellen Kelleher The first agroforestry investment vehicle of its kind is to be listed in Luxembourg within weeks. Moringa, a Sicar co-sponsored by ONF International, the environmental consultants, and La Compagnie Benjamin de Rothschild, will become the first listed investment vehicle to offer the chance to invest in a combination of agricultural and forestry projects across Africa and Latin America. As much as €50m has been raised already for the venture capital investment vehicle, which is looking to cap its fundraising at €120m. The fund’s aim is to crack down on deforestation and promote the development of sustainable land use across sub-Saharan Africa and Latin America while also turning a profit. Investment schemes range from planting 6,500 hectares of cashew trees in Madagascar to the repurposing of 12,500 hectares of unproductive savannah in the Democratic Republic of Congo to produce charcoal. “The fund is very different because you are going to manage your forest, but at the same time you will grow some agricultural products,” says Hugo Ferreira, deputy general manager with La Compagnie Benjamin de Rothschild. “That gives you a diversified income stream during the life of the fund.” Officials in the ONFI’s field offices in Cameroon, Gabon, Brazil and Colombia will assist in finding worthy projects to invest in. The fund’s duration will be 12 years as a minimum. Investments will be made in the first five years and a lengthy holding period will follow. A typical pure-play timber fund, by comparison, has a longer duration of 15 to 18 years. Management fees will be 2 per cent per year and the managers will also take 20 per cent of the capital gain after a hurdle rate of 7 per cent. Continue reading
