In contemplating a financial settlement we are often concerned with issues about the tax consequences.  The budget promoted investment in business.

• The lifetime limit for Entrepreneurs Relief is to increase from £5 million to £10 million (just 12 months ago the limit was only £1 million).

• The Enterprise Investment Scheme has been expanded so that investments of up to £1 million (previously £500,000) per person per year, in qualifying companies, can now be made under the scheme.

• The income tax relief on investments in Enterprise Investment Schemes is increased from 20% to 30%.  The capital gains tax benefits remain as they were.

• The main rate of corporation tax was to reduce from 28% to 27% from April 2011 but this will now reduce to 26% and there are planned further cuts.

Where are you resident?

Frequently when dealing with children, an essential question that needs to be answered is ‘where is a parent resident?’

The UK is virtually unique in that it has no statutory definition of tax residence.  There have been non statutory guidelines embodied in booklets produced by HMRC.

In recent litigation before a tribunal, Mr Lionel Grace, a former British Airways pilot, lost his case against H M Revenue and Customs in which he claimed that he was not resident in the UK.  The decision adds to the existing body of case law and contains a useful summary of principles including:-

• Counting the days in which one is present in the UK is a factor but it is not decisive.

• Short visits to the UK might constitute residence if they have been frequent short visits.

• The burden of proof of residence or non residence lies with the tax payer.

• The chancellor announced a consultation on the introduction of a statutory residence test in his 2011 budget.