Moore Stephens says Autumn Statement bodes well for UK business stability

International accountant and shipping adviser Moore Stephens says the Autumn Statement from the UK Chancellor of the Exchequer should provide stability for UK businesses.

Moore Stephens tax partner Sue Bill says, “While there are no new developments relating specifically to the shipping industry, there are a number of items worthy of note. It was confirmed that the corporation tax rate will be 17% from April 2020, and will not be further reduced. Rules will be introduced to limit the tax deduction that large groups can claim for interest expenses from April 2017. These will apply where a group has net interest expenses of more than £2 million, where these expenses exceed 30% of UK taxable earnings, and where the group’s net interest earnings ratio in the UK exceeds that of the worldwide group.”

Corporation tax loss relief rules will also be changed with effect from April 2017, with the result that the amount of profit that can be offset by carried-forward losses will be restricted to 50% after a £5 million allowance. There will be greater flexibility, however, with regard to the types of profit that can be relieved by tax losses brought forward.

For the oil and gas sector, the process to opt a field out of Petroleum Revenue Tax, which is now at a rate of 0%, has been simplified in order to reduce administrative costs.

It has been confirmed, meanwhile, that reforms to the taxation of non-UK domiciled individuals will be brought in from April 2017. Moore Stephens tax partner Gill Smith says, “These rules will end the permanency of the non-domiciled tax status and introduce inheritance tax for UK residential property where it is held indirectly by a non-domiciled individual through an offshore structure. In addition, Business Investment Relief rules will be changed to make it easier for non-domiciled individuals taxed on the remittance basis to bring offshore money into the UK for the purpose of investing in UK businesses.”

Others measures announced in the Autumn Statement include confirmation of reforms to the Substantial Shareholdings Exemption (SSE) rules, the introduction of further incentives to encourage research and development, and a review of the rules relating to the taxation of benefits in kind. The government has also reiterated its commitment to reduce offshore tax evasion and aggressive tax avoidance schemes.

Sue Bill says, “The Autumn Statement appears to place the emphasis on stability for UK business which, given recent events, would seem to be good news, not least for the shipping sector. “

Moore Stephens LLP is noted for a number of industry specialisations and is widely acknowledged as a leading shipping, offshore maritime and transport & logistics adviser. Moore Stephens LLP is a member firm of Moore Stephens International Limited, one of the world's leading accounting and consulting associations, with 657 offices of independent member firms in 106 countries, employing 27,613 people and generating revenues in 2015 of $2.7 billion. www.moorestephens.co.uk

For more information:
Sue Bill
Moore Stephens LLP
Tel: +44 (0)20 7334 9191
sue.bill@moorestephens.com

UK Budget 2016 provides surprises for shipping and radical measures for offshore maritime sector

Leading accountant and shipping adviser Moore Stephens says the UK Budget 2016 contains a number of surprise developments which are likely to be of interest to the shipping sector, as well as a radical set of measures which it is hoped will assist the offshore maritime oil and gas sector.

The Government announced a further reduction in the rate of corporation tax, which will be 17% from 1 April 2020. There are also significant reductions in the rates of capital gains tax. From 6 April 2016, the higher rate of capital gains tax for individuals will be reduced from 28% to 20%, and the basic rate will be reduced from 18% to 10%, although an additional 8% will apply for carried interest and for gains on some residential property. In addition, Entrepreneurs’ Relief will be extended to apply to long-term investors in unlisted companies. Under these new rules, a 10% rate of capital gains tax will apply for gains on newly issued shares in unlisted companies acquired on or after 17 March 2016, provided they are held for at least three years from 6 April 2016. There is a separate lifetime limit of £10 million of gains.

New measures to support the oil and gas sector, meanwhile, include the effective abolition of petroleum revenue tax by permanently reducing the rate from 35% to 0% with effect from 1 January 2016. The supplementary charge will also be reduced from 20% to 10% with effect from 1 January 2016. The Government will provide a further £20 million of funding for another round of seismic surveys in 2016-17, and extend Investment and Cluster Area Allowances to include tariff income in order to encourage investment in infrastructure maintained for the benefit of third parties. In addition, it will provide greater certainty that companies will be entitled to tax relief on decommissioning costs when they retain decommissioning liabilities for an asset after a sale. Other measures include a commitment from the Government to work further with the Oil and Gas Authority to reduce overall decommissioning costs, and a willingness to consider proposals for using the UK Guarantees Scheme for infrastructure where it could help secure new investment in assets of strategic importance to maximise economic recovery of oil and gas.

There are other items in the Budget which may be of interest to the maritime sector. A discussion document will be issued in Spring 2016 with options for changes to the tax treatment of leases of plant and machinery in response to new accounting standard IFRS16. Companies in tonnage tax are, however, unlikely to be affected by any such changes. Where a ‘close’ company makes a loan to a participator, the tax payable will be increased from 25% to 32.5% in April 2016, with effect for loans made on or after 6 April 2016.

The Government has announced changes to corporation tax loss relief aimed at achieving greater flexibility. For losses incurred on or after 1 April 2017, companies will be able to use carried-forward losses against profits from other income streams and other companies within a group. Currently such losses can only be offset against trading profits relating to the same trade arising in the same company. However, to the extent that profits are in excess of £5 million, it will only be possible to offset 50% of the profits using tax trading losses brought forward.

The Government is also to cap the amount of tax relief for interest payable to 30% of taxable earnings in the UK or based on the net interest earnings ratio for the worldwide group. There will be a threshold limit of £2 million net UK interest expense. Further details are yet to be announced.

Finally, there were some further announcements relating to the ongoing major reform to non domicile taxation. From 2017, non-doms who have been resident in the UK for more than 15 out of the previous 20 tax years will be taxed as if they are deemed UK domiciled. In addition, individuals with a UK domicile of origin will revert to that status for tax purposes when resident in the UK.

Moore Stephens tax partner Gill Smith says, “Significant changes to the treatment of long-term resident non-doms, to take effect from 6 April 2017, were originally announced in the 2015 Budget. For such a significant change to the taxation of this group of taxpayers, the lack of detail since the original announcement has been concerning.”

The Budget papers only make very limited, but potentially important, reference to the changes. These are:

Non-doms who become deemed domiciled from April 2017 will benefit from uplift in the cost basis of their non-UK assets. It remains to be seen whether this applies to assets held via offshore trusts or whether individuals who become deemed domiciled at a later date will also benefit from this uplift.

Non-doms who become deemed domiciled will benefit from transitional provisions with regard to offshore funds to provide certainty on how amounts remitted to the UK will be taxed, although again it is not clear whether this applies to those becoming deemed domiciled on 6 April 2017 or at a later date. This may give a measure of relief from the notoriously complex mixed fund rules which determine the source of remittances made to the UK by non-doms.

Confirmation that non-doms who establish offshore trusts before becoming deemed domiciled will not be taxed on income or gains retained within the trust. Previous updates have indicated that UK source income would remain taxable on the non-dom in these circumstances, but no reference is made to this in the Budget documents.

Gill Smith concludes, “The measures announced are helpful at least to some extent, but the details are limited and there are many other areas that need considering prior to April 2017. These delays cause uncertainty and may result in affected taxpayers choosing to leave the UK. There are no further announcements on the proposal to charge owners of UK residential properties held through non-UK structures inheritance tax with effect from 6 April 2017. Again, this lack of detail is unsettling for clients and more detail is urgently required.”

Moore Stephens LLP is noted for a number of industry specialisations and is widely acknowledged as a leading shipping, offshore maritime and insurance adviser. Moore Stephens LLP is a member firm of Moore Stephens International Limited, one of the world's leading accounting and consulting associations, with 657 offices of independent member firms in 106 countries, employing 27,613 people and generating revenues in 2015 of $2.7 billion. www.moorestephens.co.uk


For more information:
Gill Smith
Moore Stephens LLP
Tel: +44 (0)20 7334 9191
gill.smith@moorestephens.com

Sue Bill
Moore Stephens LLP
Tel: +44 (0)20 7334 9191
sue.bill@moorestephens.com

Moore Stephens says UK Budget is generally good news for shipping sector

International accountant and shipping adviser Moore Stephens says the UK Budget 2013 contains generally good news for the shipping sector.

Measures which will have an impact on the shipping industry include a reduction in the main rate of UK corporation tax.  This is 23 per cent for the year ended 31 March 2014, reducing to 21 per cent from April 2014. A further reduction to 20 per cent from April 2015 has now been announced. 

There was also good news for shipping on the capital gains front. Last year the government announced that, where a company had a functional currency other than sterling, capital gains and losses on disposals of shares would with effect from April 2013 be calculated in that functional currency rather than in sterling. Moore Stephens tax partner Sue Bill says, “Now, following representations by Moore Stephens and others, it has been announced that this measure has been extended to cover the disposal of ships and aircraft as well as shares, thus removing an anomaly in the calculation of capital gains and losses arising on ships outside the UK tonnage tax regime.

“Where ships are held outside the UK tonnage tax regime, capital allowances (or tax depreciation) are available in respect of the capital cost of the ship.  For many years, no first-year allowances (being accelerated capital allowances available in the year of acquisition) have been available in respect of ships. This exclusion from claiming first-year allowances has now been removed for ships and railway assets.  This, however, may be of limited benefit as first-year allowances are currently only available in respect of a limited number of assets, in particular energy-efficient and environmentally beneficial plant and machinery of a description specified by Treasury order, which can qualify for 100 per cent allowances in the first year.  Therefore it is not yet clear how beneficial the removal of this anomaly will be in practice.”  

Sue Bill concludes, “The Budget 2013 is generally good news for the shipping sector as the UK government is clearly looking to ensure that the UK tax system is as competitive as possible, and certain anomalies having a potentially detrimental effect for some shipowning companies have been removed.”

Moore Stephens LLP is noted for a number of industry specialisations and is widely acknowledged as a leading shipping and insurance adviser. Moore Stephens LLP is a member firm of Moore Stephens International Limited, one of the world's leading accounting and consulting associations, with 624 offices of independent member firms in over 100 countries, employing 21,224 people and generating revenues in 2012 of $2.3 billion. www.moorestephens.co.uk

For more information:                                                          

Sue Bill                                                               

Moore Stephens LLP                                                    

Tel: +44 (0)20 7334 9191                                              sue.bill@moorestephens.com                                         

Moore Stephens calls for rethink on capital gains exchange rate distortions on ships

International accountant and shipping consultant Moore Stephens has urged the UK government to remove exchange rate distortions when calculating capital gains on ships.

Moore Stephens tax partner Sue Bill explains, “Currently, all capital gains and losses subject to UK corporation tax are calculated by reference to sterling, with the result that capital gains and losses arising on non-sterling assets, including certain ships, can be significantly distorted by exchange rate fluctuations. For example, even where there is no increase in the dollar or euro value of a ship, a taxable capital gain can arise solely as a result of a fall in the value of sterling. 

“In order to avoid such distortions, the UK government has now proposed changes to these rules so that capital gains and losses in some cases can be calculated in a currency other than sterling. Under the proposed changes, where a company has a non-sterling functional currency, capital gains and losses will in future be calculated in the company’s functional currency. But this will only apply to shares and not to physical assets.   

“UK resident shipowning companies are subject to potentially very large distortions due to exchange rate fluctuations when calculating capital gains or losses on their ships, although this is less of an issue if there is a capital loss, because relief is likely to be available by way of capital allowances rather than in the form of a capital loss.

 “These rule changes are not relevant for UK shipowning companies whose ships have all been within the tonnage tax regime throughout the period of ownership by that company. But they are relevant for UK companies that are not in the UK tonnage tax regime, or that have some ships wholly or partly outside tonnage tax. They will also be relevant for companies owning chargeable assets other than ships which are subject to exchange rate fluctuations by reference to sterling.” 

The closing date to comment on the UK government’s proposals is 15 October 2012. Moore Stephens has made representation to the government that the proposed changes to the existing rules should apply to ships as well as to shares, so that any calculations are made in the company’s functional currency.

Moore Stephens LLP is noted for a number of industry specialisations and is widely acknowledged as a leading shipping and insurance adviser. Moore Stephens LLP is a member firm of Moore Stephens International Limited, one of the world's leading accounting and consulting associations, with 636 offices of independent member firms in 100 countries, employing 21,197 people and generating revenues in 2011 of $2.3 billion. www.moorestephens.co.uk

For more information:                                                            

Sue Bill

Moore Stephens LLP                                                                

Tel: +44 (0)20 7334 9191                                                           

sue.bill@moorestephens.com                                          

Moore Stephens says UK Budget 2012 includes encouraging signs for shipping industry

INTERNATIONAL accountant and shipping adviser Moore Stephens says the UK Budget 2012 contains some encouraging signs for the shipping industry.

The government has stated that it will consult later this year on whether to introduce a rule allowing companies with a non-sterling functional currency to compute their capital gains and losses in such functional currency, rather than in sterling, as is currently the case. Moore Stephens tax partner, Sue Bill, says, “This is of particular relevance for UK companies which own vessels outside the UK tonnage tax regime, either because the company did not elect into tonnage tax, or because the ship does not qualify for tonnage tax, for example because it is chartered out on a long-term bareboat charter, or is a type of vessel excluded from tonnage tax such as a fishing vessel. As all capital gains are currently calculated in sterling, where a company has a different functional currency its capital gains and losses will include an exchange gain or loss. This possible change in the rules would minimise taxable capital gains arising due to (or being reduced by) exchange rate movements.”

Another change introduced by the Budget is a reduction in corporation tax rate by an additional one per cent from April 2012. This means that the rate will be 24 per cent from April 2012, reducing to 23 per cent in April 2013 and 22 per cent in April 2014. The government has said that it expects this measure to increase the level of business investment in the UK by approximately one per cent.

The government has also announced an internal review to examine the role of employee ownership in supporting growth and to look at options to remove barriers, including tax barriers, to its wider take-up. However, the likely outcome of any such review remains unclear at present.

Sue Bill says, “Generally, the Budget has emphasised the importance which the government attaches to ensuring that the UK is a competitive regime for industry, and of ‘rebalancing’ the economy. This is an encouraging sign for the shipping industry, which is awaiting consultation on the UK tonnage tax regime and the forthcoming EU review of the State Aid Guidelines to Maritime Transport.”

Moore Stephens LLP is noted for a number of industry specialisations and is widely acknowledged as a leading shipping and insurance adviser. Moore Stephens LLP is a member firm of Moore Stephens International Limited, one of the world's leading accounting and consulting associations, with 636 offices of independent member firms in 100 countries, employing 21,197 people and generating revenues in 2011 of $2.3 billion. www.moorestephens.co.uk

For more information:
Sue Bill
Moore Stephens
+44 (0)207 334 9191
sue.bill@moorestephens.com