Moore Stephens says UK Budget is neutral for shipping and good for offshore

International accountant and shipping adviser Moore Stephens says the UK Budget 2017 contained no unwelcome surprises for the shipping industry, and some good news for the offshore sector.

Moore Stephens tax partner Sue Bill says, “There are new rules, already announced, that will affect the deductions which a UK group can be claim for interest expenses. The new tax rules will restrict each group’s net deductions for interest to 30% of earnings before interest, tax, depreciation and amortisation (EBITDA) that are taxable in the UK. These rules should not affect tonnage tax companies, as those companies have no deduction for interest paid within the tonnage tax ring fence.

“There is also a reference to the government consulting later this year on legislative changes required following the announcement of the International Accounting Standard Board’s new leasing standard IRFS 16 Leases, which comes into effect from 1 January 2019. The government intends to maintain the current system of leased taxation by making legislative changes which enable the rules to continue to work as intended.

“HMRC has also confirmed that the new rules being introduced from April 2017 for non-UK domiciled individuals (‘non-doms’) will apply from 6 April 2017 for those who have been UK-resident for 15 out of the past 20 tax years.

“Improvements to the oil and gas regime, meanwhile, include an extension to investment and cluster area allowances, and tax for late-life oil and gas assets. These are aimed at improving the attractiveness of the North Sea as an area for investment.

“There have been no changes to the shipping rules, in particular those within the UK tonnage tax regime or in the taxation of non-resident shipping companies. Overall, this is probably a case of no news being good news 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 626 offices of independent member firms in 108 countries, employing 27,997 people and generating revenues in 2016 of $2.7 billion. www.moorestephens.co.uk


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

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

UK government Autumn Statement is generally helpful for the shipping sector

International accountant and shipping adviser Moore Stephens says the UK Chancellor’s Autumn Statement 2014, issued on 3 December, is generally helpful for the shipping and offshore sectors.

Moore Stephens tax partner Sue Bill notes, “While there is nothing in the Autumn Statement 2014 which is of fundamental importance to the maritime sector, there are some changes which may be of interest to the shipping and offshore industries.

“For example, the remittance basis charge will increase for some non-UK domiciled individuals. For individuals who have been UK-resident for 12 out of the last 14 years, the charge will increase from £50,000 to £60,000. A new charge, of £90,000, will be introduced for individuals who have been UK-resident for 17 out of the last 20 years. In addition, the government will consult on making the election apply for a minimum of three years.

“As expected, the UK government will introduce legislation giving it the power to implement the OECD model for country-by-country reporting. These rules will require multinational enterprises to provide high-level information to Her Majesty’s Revenue & Customs on their global allocation of profits and taxes paid, as well as indicators of economic activity in each country.”

Meanwhile, a number of measures have been introduced of relevance to the oil and gas sector. Sue Bill explains, “The government will introduce an immediate 2 percent reduction in the rate of the Supplementary Charge from 32 percent to 30 percent, with effect from 1 January 2015, and will aim to reduce the rate further in the future. The ring-fence expenditure supplement will also be extended from 6 to 10 accounting periods for all ring-fence oil and gas losses and qualifying pre-commencement expenditure incurred on or before 5 December 2013. The government is also introducing an allowance to support the development of high-pressure, high-temperature projects. From 3 December 2014, an amount of profits equal to 62.5 percent of the qualifying capital expenditure a company incurs will be exempt from the Supplementary Charge. “

A new exemption from withholding tax on interest on qualifying private placements (a type of unlisted debt) has also been announced to help the provision of new finance for businesses and infrastructure projects.

Finally, as part of further measures to minimise aggressive tax planning by multinational enterprises, a new tax will apply where such enterprises divert profits from the UK. The Diverted Profits Tax will be 25 percent and will apply from 1 April 2015.

Sue Bill says, “Overall, setting aside the changes for non-UK-domiciled individuals, this is generally a helpful budget for the shipping and offshore sectors. The new exemption from withholding tax on interest on qualifying private placements, while subject to further details, could make it easier for companies to raise finance without incurring withholding tax liabilities of up to 20 percent on interest payments. The continuing government clampdown on aggressive tax avoidance by multinational enterprises is not unexpected. Meanwhile, the new high-pressure, high-temperature cluster area allowance taking effect from 3 December 2014 is among a number of encouraging measures for the oil and gas sector.”


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 667 offices of independent member firms in 105 countries, employing 27,081 people and generating revenues in 2013 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 good news for shipping despite mixed news for non-doms

Leading accountant and shipping adviser Moore Stephens says that, despite mixed news for non-UK-domiciled individuals, the UK Budget 2011 appears to be good news for shipping.

The bad news in the Budget, announced on 23 March, is that the existing annual remittance basis charge for non-doms resident in the UK for twelve years or more will increase from £30,000 to £50,000, albeit not until 6 April, 2012.

The good news is that the government also proposes not to tax foreign income or capital remitted to the UK for the purposes of ‘commercial investment in UK businesses’, and to simplify some aspects of the current rules for non-doms to remove administrative burdens, which increased significantly from April 2008. It is also proposed that no other substantive changes to the rules for non-doms will be made for the rest of this parliament. The government will issue a consultation document in June with a view to implementing the rules from 6 April, 2012.

Sue Bill, a tax partner with Moore Stephens, says, “The government will also be consulting on the introduction of a statutory definition of residence. Under current rules, the residency of individuals is a very grey area and greater certainty is only to be welcome. Again a consultation document is proposed for June with implementation of the new measure from April 2012. It is unlikely that there will be more detail until June, but the timetable should provide time for adequate planning.

“Overall, there seems to be an acceptance by the government of the positive impact that inward investment by non-doms brings to the UK”.

Other, minor changes in the Budget include a change to the rate of capital allowances on ships which are leased to tonnage tax companies. The rate of writing-down allowances that can be claimed on the first £40 million of expenditure will be aligned with the rate applicable to other ships, including where the ship is a long-life asset. This legislation has effect for expenditure incurred on or after 1 January, 2011, and is likely to reduce the rate of writing-down allowances in respect of such ships.

There is also a new exemption from tax on foreign branches of UK companies whereby a UK company operating outside the UK through a foreign branch will be able to make an election to exempt the profits of its foreign branches from UK corporation tax. Such companies may be able to reduce or eliminate the UK corporation tax payable on branch profits by offsetting foreign tax paid on these profits in any case. This new foreign branch exemption, however, does not apply to shipping, to the extent that the foreign branch is not taxed in the overseas jurisdiction as a result of the terms of a double tax treaty.

Minor changes have also been made to the ‘controlled foreign company’ (CFC) rules. The de minimis exemption is to be increased to companies with chargeable profits below £200,000 per annum, and there will be a statutory three-year exemption from these rules for foreign subsidiaries that come within the scope of the CFC regime as a consequence of a reorganisation or change to UK ownership. There will be further consultation on these rules.

Finally, corporation tax rate will be reduced by a further 1 per cent, so that, from April 2011, the corporation tax rate will be 26 per cent and, by 2014, it will be 23 per cent.

Sue Bill says, “There is mixed news for non-UK-domiciled individuals. But there are few other changes that will affect shipping. The government has emphasised the need for stability, and clearly intends to consult before making any major taxation changes. The government has also emphasised the need for the UK corporation tax regime to be attractive to international businesses. Overall, it seems to be good news for shipping.”

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 638 offices of independent member firms in 97 countries, employing 20,588 people and generating revenues in 2010 of $2.15 billion. www.moorestephens.co.uk

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