Thursday, 28 January 2016

Executors: it’s time to turn detective or risk a penalty

An essential part of any executor’s job is to work out the assets and liabilities of the estate that they are administering.  An executor also owes a statutory duty to HMRC to correctly report the value of the estate to it so that, if any Inheritance Tax is due on the estate, the right amount is paid. 

The job of the executor is made more difficult because the Inheritance Tax rules require gifts made in the seven years prior to death to be brought back into account.  However it’s not uncommon for an executor to know next to nothing about the deceased’s personal finances, let alone what gifts the deceased has been making and to whom.  This can be a real problem for executors because if the executor reports to HMRC that there have been no gifts but HMRC is able to produce evidence of gifts having been made, the executor may receive a tax geared penalty, calculated with reference to the potential tax forgone if the gift had remained undiscovered, which the executor is personally liable for.  So how much detective work does an executor have to do to avoid any risk of getting a penalty for undeclared gifts?

Thursday, 14 January 2016

New Stamp Duty Land Tax proposals – a market changer?

In the Autumn Statement last month, the Government proposed that purchases of additional residential properties in England, Wales and Northern Ireland should be subject to an extra 3% Stamp Duty Land Tax (SDLT) on top of the standard SDLT rates.  All types of residential property will be caught – second residences, buy-to-lets or furnished holiday lets – unless worth under £40,000. 


The key test of whether the new rules will apply is this.  If, at the end of a day in which an individual purchases a residential property, that individual owns two or more residential properties and the purchase was not replacing their main residence, the additional 3% SDLT will be due.  The main exception to this (for home-owners) is if the individual was purchasing a main residence and can demonstrate that a previous main residence was sold within 18 months of the purchase.


How might the proposed changes affect individuals?

Thursday, 10 December 2015

Changes to business investment relief: a sop to non-doms?

Business investment relief (BIR) has been a feature of the UK tax system since April 2012 and it is unusual, being the only exception to the remittance basis of taxation that is ‘purpose-specific’.  BIR allows UK resident non-doms to bring into the UK untaxed foreign income and foreign gains without making a taxable remittance of those funds.   The purpose of the relief is to encourage foreign investment into UK commercial enterprise.  However, as reliefs go, it is relatively unloved.  Its uptake since inception has been limited but, thanks to the Autumn Statement 2015, it is back in the spotlight again as the Government announced a consultation on altering BIR to increase its use, with the aim of increasing investment into UK businesses. 

Thursday, 26 November 2015

Transparency and trusts: an update

Many of you will know that the UK has now passed legislation requiring the beneficial ownership of UK registered companies to be held on a publicly available register by June 2016.  The exact detail of what has to appear on the register at Companies House is yet to be confirmed.

With companies in the spotlight, it was only a matter of time before trusts came under similar scrutiny.  It was clear from the recitals to the EU’s 4th Anti-Money Laundering Directive (4AMLD) that trusts and similar structures should not be given comparatively favourable treatment.  Therefore Article 31 of the 4AMLD provided, among other things, that Member States should require trustees to hold accurate information about the settlor, trustees and beneficiaries.  The trustees should also provide that information to a central register.  However, only trustees of a trust which ‘generates tax consequences’ were obliged to do so. 

Separately, in November 2014 at the G20 Brisbane summit, the UK Government committed to implementing the G20 High Level Principles on Beneficial Ownership Transparency.  What this commitment will involve has now been published and essentially we have a flavour of how the UK Government will interpret its obligations under the 4AMLD.

Thursday, 12 November 2015

UK residential landlords – significant tax changes may lie ahead

The Government has passed legislation which will increase UK tax bills for most individuals (whether UK resident for tax purposes or not) owning UK residential let property, where the property has been part financed through mortgage debt.  The changes take effect from 6 April 2017.  Those with high gearing and significant interest payments will be particularly affected.

The changes come on top of an alteration to wear and tear allowance for landlords of furnished residential lets, coming into effect in April 2016, but in this blog, I focus on residential landlords with mortgages.

Thursday, 29 October 2015

‘Will you still need me, will you still keep me…?’ Offshore trusts and non-doms

We now have further details of the proposed changes in April 2017 to the UK’s remittance basis of taxation for non-doms, courtesy of the Treasury’s September 2015 consultation paper. 

The changes to how non-UK (i.e. offshore) trusts will be treated is particularly dramatic.

Thursday, 15 October 2015

Will your client’s choice of executor mean more tax?

How do your clients choose the executor(s) of their Will? 

Being married to the will-maker is often the only qualification needed to secure an appointment!  Otherwise it might be the person’s suitability to the demands of the role, or their willingness to act.

Tax efficiency is often overlooked.  However, a will-maker’s choice of executor (and trustee of any trust incorporated within the Will) can sometimes make a big difference for UK taxes, so it’s good to understand how the rules of the game work.