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. 

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.

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.

‘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.

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.  

IHT Same Day Additions – where are we now?

Does using multiple trusts save Inheritance Tax (IHT) still, or has IHT planning with multiple trusts been effectively abolished?  When the second Finance Act of 2015 comes into force later on this autumn, we will finally have the answer.

Losing the plot over CGT principal residence relief

In the UK, we take for granted that if we sell our main home, we don’t have to pay Capital Gains Tax (CGT).  Yet, selling a home is still a disposal for CGT purposes.  The main thing that prevents a CGT bill from being triggered by a sale of the home is CGT principal residence relief (PRR).  As it can prove to be such a valuable relief, it’s worth any homeowner getting to grips with PRR.  Otherwise, if your home comes with a bit of land for example, you could end up with an unwelcome CGT bill if you decide to sell up.  That was the fate of Mr and Mrs Fountain, in the recent case of Fountain v HMRC ([2015] UKFTT 0419 (TC)). 

Calling all EU asset owners: you’ve got mail (from Brussels)

Finally, the EU Succession Regulation (Brussels IV) is fully in force.  It’s been a long time coming.  Part of it came into effect as long ago as 2012 but in recent months, as 17 August 2015 (‘coming into force’ day) approached, there has been much more discussion about what Brussels IV is going to mean in practice.  Essentially, if you or your clients hold assets in virtually any EU state, or have a residency or nationality connection with an EU state, Brussels IV affects you.  This blog does not attempt to explain what Brussels IV is (see my September 2013 blog for the basics).  Instead, it gives the latest thinking on how Brussels IV might apply in practice and what to do now.

Use it or lose it: Government announces early closure of LDF

The UK Government has recently announced that the beneficial terms of the Liechtenstein Disclosure Facility (LDF) will cease on 31 December 2015 (the facility had previously been due to run until April 2016). The LDF is a tax disclosure process through which individuals can bring their tax affairs up to date with HMRC on favourable terms and in particular benefit from reduced penalties and full immunity from criminal prosecution.

Nearest but not necessarily dearest: disinheriting children post Ilott

The Ilott case has caused a fair degree of furore in the UK press recently.  Testamentary freedom in England is sacrosanct in many English citizens’ minds but has the recent Court of Appeal ruling (Ilott v Mitson [2015] EWCA Civ 797) undermined that freedom?  And if so, how can anyone ensure that their Will is upheld and respected after death?

The new Inheritance Tax Residence Nil Rate Band

The Summer Budget Finance Bill (the Finance (No. 2) Bill 2015) has now been published and it contains the draft legislation to implement the new Inheritance Tax (IHT) Residence Nil Rate Band (RNRB).  So let’s take a look at the detail of what’s involved.

Budget bonus: Briefing notes on changes to non-dom taxation and additional IHT nil rate band

Below you will find links to some client friendly notes on the proposed non-dom taxation changes and the introduction of the new additional Main Residence nil rate band for Inheritance Tax, all announced in last Wednesday's Summer Budget. 


No doubt these significant proposals will be the subject of future blogs, so watch this space!


http://www.fladgate.com/nondomtax/

www.fladgate.com/ihtnondoms

http://www.fladgate.com/nilrateband2015

Trustbusters

Most English trusts these days specify a ‘Trust Period’ of no more than 125 years.  In practice, this means that someone must have a vested interest in the trust assets (whether that’s vested in possession (i.e. an immediate right to ‘current enjoyment’) or vested in interest (an immediate right to ‘future enjoyment’)) within 125 years. 

Sometimes trusts outstay their welcome, though.  If you have a client desperate to find a way to end a trust, don’t assume there is nothing that can be done.  It is sometimes possible to end a trust without needing the agreement of the trustees (which may not be forthcoming).  Here’s how.

The insider’s guide to English Pre-Nuptial Agreements

English pre-nups (PNAs) are now an important consideration for families intent on protecting the family wealth, thanks to the 2010 case of Radmacher v Granatino.  Whilst PNAs do not oust the jurisdiction of the English court to have the final say in the matter, they can be determinative when it comes to splitting up wealth in the event of a divorce, as long as they are freely entered into, with a proper understanding by both parties as to the implications of the agreement and make fair provision for each spouse. 


There is a lot of available information on what PNAs are but much less information on just who is making them and why.  I caught up with our family law partner, Teresa Cullen, to ask her some candid questions about PNAs.  I hope you will find the answers illuminating.

Pre-Owned Assets Tax: the forgotten tax

Pre-Owned Assets Tax (POAT) was introduced in the Finance Act 2004.  Ten years is a long time but, when it comes to tax statute, ‘age cannot wither her’.  This tax has teeth and is capable of biting, not with a tax bill after death, like Inheritance Tax, but, worse, with an annual Income Tax charge that can be a very real drain on cash flow for the living.  What is this beast?  Read on.

New CGT rules for non residents: what to do now

This is the first UK tax year in which non UK residents will be subject to Non Resident UK Capital Gains Tax (NRCGT) when disposing of their UK residential property to anyone other than their spouse/civil partner or to charity.  Non resident trustees and personal representatives pay NRCGT at 28% on taxable gains and individuals pay 18% or 28%, depending on their taxable UK income and other UK gains in the tax year in which the gain arises.  If non resident companies are not subject to Annual Tax on Enveloped Dwellings – CGT (ATED-CGT), which always takes precedence, they pay NRCGT at 20% instead.  Only closely held companies are affected by NRCGT.

The Reluctant Will Maker

When you are surrounded by wills on a daily basis (as I am), it’s easy to forget that, for some of our clients, even the thought of making a will is a stressful business, to be avoided at all costs.  This was brought home to me recently when I met a couple of Family Office bankers.  They explained that some of their clients find the whole will making process a bit daunting.  The lawyer asks a lot of serious and scary questions, such as what should happen to the family business, when should the children inherit, who should be their guardians etc. etc. and then nothing gets done!  As a lawyer, this is exactly what I don’t want to see happening, as I know the profound family heartache and disruption that can arise if someone dies without a will (see my blog: ‘Dying without a will – the hard facts’ 3 July 2014; I’m afraid that might indeed scare you).

Pension death benefits planning: a question of control

Before the recent pension changes were announced, it made sense, for Inheritance Tax (IHT) planning purposes, to request that any death benefits payable from a money purchase private pension on the pension scheme member’s death were paid into a separate trust (a ‘bypass trust’), usually for the benefit of the member’s spouse and family.  Structuring matters in this way would prevent what could sometimes be significant sums from being paid direct to the surviving spouse, with the potential for any unspent funds to be taxed at 40% IHT on the surviving spouse’s death.  On the other hand, by using the trust route, the spouse could still enjoy full access to the pension funds via loans made from the trust, which have the potential to be deductible for IHT purposes on the survivor’s death.

Mixed domicile couples

Non-doms are in the news again, with one British political party wanting to scrap non-domiciled status if they are elected to be the next Government on 7 May.  This sort of headline reinforces the casual view that being a non-dom is always advantageous for UK tax purposes.  However, if you are part of a mixed domicile couple, where one of you is UK domiciled and the other isn’t, you might disagree.  Estate planning is not plain sailing for you.

ATED tips and traps

Apologies to all my regular Thursday readers but the electrical fire in Kingsway last week disrupted internet connectivity.  Here is last week's blog.  The next post is scheduled for Thursday 16 April.

Financially minded Brits will be focused on the impending end of the British income tax year.  Here in the office, we’re also focused on the start of another one – the 2015/2016 Annual Tax on Enveloped Dwellings (ATED) tax year begins on 1 April 2015 and, for UK residential properties valued for ATED purposes as worth £2 million or over, owned by ‘non-natural persons’ such as companies, the ATED tax returns and any tax due must be in by 30 April 2015. 

How to save Inheritance Tax on your main residence

Successful Inheritance Tax (IHT) mitigation in respect of the main residence is one of the hardest things to do, as the law currently stands.  However, as many people’s most valuable asset is their bricks and mortar, it is a problem that demands some consideration – even if the answer is to do nothing (yet) or take out life cover written in trust.  But if neither of those appeals, what then?

Can I take instructions from my client’s attorney?

You have been managing your client’s money for many years when, out of the blue, you are contacted by someone claiming to be your client’s attorney.  The attorney is brandishing a copy English Property and Financial Affairs Lasting Power of Attorney (LPA), certified on every page (as it should be) by the donor (i.e. the giver) of the power.  So far, so reassuring.  But is it safe for you to act on the attorney’s instructions?  Here’s some food for thought.

EU Trusts Register – update

In my 13 March 2014 blog on ‘Trusts and the EU’s Fourth Anti-Money Laundering Directive’, I highlighted the EU Parliament’s plans to introduce a register of settlors, trustees and beneficiaries of trusts, as set out in the draft of the Fourth Anti-Money Laundering Directive.  The Directive has now been finalised and, whilst it looks as though the register will still go ahead, the number of trusts affected will be reduced and trust information will not be placed on a publicly available register.

IHT related penalties: a warning for PRs and beneficiaries

The recent case of Hutchings v HMRC [2015] UKFTT 0009 (TC) will be of interest to anyone acting as executor/administrator of an estate and anyone who is a beneficiary.  Like the sword of Damocles, HMRC was dangling a tax penalty of £87,000 over the heads of both the executors and one of the beneficiaries – but which one of them would take the rap?  The Tax Tribunal’s reasoning for their decision is fascinating stuff.

IHT planning for business owners: business finance

As a general rule, Inheritance Tax (IHT) is payable on the net value of assets.  In other words, debts are generally deductible when calculating what a person is worth for IHT purposes on death.  However, the Finance Act 2013 introduced limitations on the deductibility of certain debts.  Judging from a few cases that have come to my attention recently, business owners still remain blissfully unaware of the impact of these changes on them.  Time for a quick reminder, then.