July 2015 2020 Innovation September Tax Webinar Martyn Ingles Agenda • Finance Bill progress • More consultations • HMRC announcements , other developments • Recent tax cases • Tax Planning strategies 1
July 2015 Finance Bill 2015 • IHT – Residence Nil Rate Band – clause 9 amended • Other key issues: • CT rate to be reduced to 19% then 18% • AIA to be set at £200,000 from 1.1.2016 • Pensions – Annual Allowance restriction for HNWIs • “Buy to Let” interest to be restricted from 6 April 2017 • No CT deduction for goodwill acquired after 7.7.2015 • Direct recovery of tax debts from bank accounts Further Consultations 2
July 2015 Consultation on Termination Payments • OTS review of employee benefits and expenses • Many employers treat termination payments incorrectly • Deduct too much or insufficient tax • Current £30,000 tax free ex-gratia payment to go? • Align treatment for income tax and NICs • New limit to be based on years service and level of earnings? 5 Termination Payments – common errors • Mistaken belief amongst employees and employers that the first £30,000 of any pay-off is free of IT and NICs; • Lack of understanding by employers of difference between contractual and non-contractual payments; and • Difficult and time-consuming to establish the true nature of each separate element of a termination payment. • In particular the treatment of PILONs (contractual) and non-contractual payments in lieu of notice; and payments around retirement age. 6 3
July 2015 IHT Residence Nil Rate Band (RNRB) • Additional £175,000 NRB for family home left to direct descendants • No IHT on transfer of family home <£1,000,000 = (£325,000 + £175,000) x 2 • Like NRB transferred to surviving spouse if un+used • Also available if downsize • Taper relief by £1 for £2 over £2,000,000 before IHT reliefs – e.g. BPR, APR • May need to review client’s Will’s and estate planning IHT Residence Nil rate Band • Additional NRB for family home, phased in: • £100,000 – 2017/18 • £125,000 – 2018/19 • £150,000 – 2019/20 • £175,000 – 2020/21 • Then increased with CPI 4
July 2015 Residence Nil Rate Band - Downsizing • HMRC have issued Technical Note on how additional nil band will work if downsize: 1. to a less valuable residence and that residence, together with assets of an equivalent value to the ‘lost’ RNRB, has been left to direct descendants, or 2. sold their only residence , and the sale proceeds, or assets of an equivalent value, have been left to direct descendants, or 3. has otherwise ceased to own their only residence , and other assets of an equivalent value have been left to direct descendants RNRB – Downsizing Conditions • Individual dies on or after 6 April 2017 • The property disposed of must have been owned by the individual and it would have qualified for the RNRB had the individual retained it • Less valuable property, or other assets of an equivalent value if the property has been disposed of, are in the deceased’s estate • Less valuable property, and any other assets of an equivalent value, are inherited by the individual’s direct descendants on that person’s death 5
July 2015 RNRB – Downsizing – Further Conditions • Downsizing or the disposal occurs after 8 July 2015 • No time limit on the period in which the downsizing or the disposals took place before death • Any number of downsizing moves between 8 July 2015 and the date of death of the individual • Would also include disposing of part of a property (including land occupied and used as a garden or grounds) or a share in it • Where a property is given away, assets of an equivalent value to the value of the property when the gift was made must be left to direct descendants RNRB – Downsizing – Further Conditions • Value of the property would be the net value i.e. after deducting any mortgage or other debts charged on the property • Additional RNRB would be tapered away in the same if the value of the estate at death is above £2m • Additional RNRB would be applied together with the available RNRB but the total for the two would still be capped so that they would not exceed the limit of the total available RNRB for a particular year • A claim would have to be made for the additional RNRB 6
July 2015 RNRB – Downsizing – Example 1 • Widow sells a home worth £400,000 in August 2020 and moves to a home worth £210,000. • At the time of the sale the available RNRB is £350,000 • By downsizing, she has potentially lost the chance to use £140,000 or 40% of the available RNRB • When the widow later dies in October 2020, the home is worth £225,000 and is left to her children together with £500,000 of other assets. RNRB – Downsizing – Example 1 • The estate can use an RNRB of £225,000. However, the widow was eligible for an RNRB of £350,000 had she not downsized. The estate can therefore claim an additional RNRB of 40% of the available RNRB (40% x £350,000) or £140,000. • This would give a total RNRB of £365,000 (£225,000 + £140,000). • But this is more than the maximum available RNRB (£350,000) so the additional RNRB is restricted to £125,000 • Plus ex husband’s unused NRB 7
July 2015 Taxation of Non-Doms - Consultation • Announced in Summer Budget • If enacted - effective from 6 April 2017 • New “deemed domicile” status where individual has been resident in the UK for at least 15 of the past 20 tax years; • restrictions on non-dom status for individuals with a UK domicile of origin who have acquired a domicile of choice elsewhere, for periods when UK resident Non-Doms with UK Residential Property • Currently: no IHT if held via offshore company or trust • Non-Doms only pay IHT on UK situs property • Planning – transfer foreign assets into ‘ excluded property’ trust whilst non-domiciled • Remain excluded property even if become domiciled (17 year rule) • Transfer offshore company owning UK house to excluded property trust – no IHT 8
July 2015 Non-Doms with UK Residential Property • Proposal: • Trusts or individuals owning UK residential property through an offshore company, partnership or other opaque vehicle, will pay IHT on the value of such UK property in the same way as UK domiciled individuals • Will apply to all UK residential property whether it is occupied or let and of whatever value • Just UK residential property, not other assets • To be in Finance Act 2017 – start date 6 April 2017 Non-Doms with UK Residential Property • Main Chargeable events: • Death of the individual wherever resident who owns the company shares • A gift of the company shares into trust • 10 year anniversary of the trust • Distribution of the company shares out of trust • Death of the donor within 7 years of having given the company that holds the UK property to an individual 9
July 2015 Tackling Offshore Tax Evasion - Consultations • 4 consultations: 1. Strengthening civil deterrents for offshore evaders 2. Civil sanctions for enablers of offshore evasion 3. A new corporate criminal offence of failure to prevent the facilitation of evasion 4. A new criminal offence for offshore evaders Country by Country Reporting - Consultation • OECD recommendation - tax avoidance by multi-nationals – BEPS Action point 13 • OECD have developed template to collate data • UK have legislated in FA 2015 • Applies to AP s commencing on or after 1 January 2016 • Where consolidated group revenue > £586 m 10
July 2015 HMRC Announcements and other developments HMRC Factsheet – Accelerated Payments “We have given you this factsheet because you have used a tax avoidance scheme, and we will soon ask you to make a payment of the amount that relates to your use of t he scheme” Note: No formal right of appeal But may make representations if not correctly issued, or the amount is incorrect 11
July 2015 HMRC Factsheet – Accelerated Payments • We may issue an accelerated payment notice to a person who has used an avoidance scheme if: 1. there is a current compliance check into their return or claim, (or for partnerships, into the partnership return or claim), or there is an open appeal (Condition A) 2. the return, or claim, or the appeal is made on the basis that there is a tax advantage from the avoidance scheme used (Condition B) • and one or more of the following applies(Condition C) HMRC Factsheet – Accelerated Payments • and one or more of the following applies (Condition C) 1. we have given the person (or the nominated partner) a follower notice 2. the person (or the partnership) has used arrangements that are disclosable under the DOTAS legislation 3. the person (or the partnership) is subject to a counteraction notice under the GAAR 12
July 2015 HMRC Guidance RDR1 Updated • Residence, Domicile and Remittance Basis • Updated to reflect new CGT charge on Non- residents disposing of UK residential property from 6 April 2015 • Also new remittance basis user charges for 2015/16 Remittance Basis User charge increase for Non Doms: UK resident 2014/15 2015/16 7 out of last 9 tax years £30,000 £30,000 12 out of last 14 tax years £50,000 £60,000 17 out of last 20 tax years £50,000 £90,000 13
Recommend
More recommend
