With the final stages of Brexit negotiations underway, opinion was divided as to whether Philip Hammond would use the Budget to make any significant economic or political announcements. Paul Blackwell and Sandra Francis, Trust Tax Manager, review the implications.
In the event, only a few policy statements were made which may be of interest to private clients and their offshore structures, but note with caution the unsettling caveat that if the fiscal outlook changes materially (especially if a no-deal Brexit materialises) further action will be taken by the Government in the short term.
The Chancellor announced tax savings for companies focused on investment and innovation. For individuals, increased personal allowances and increased higher rate thresholds were confirmed one year earlier than originally planned, which we expect will be welcomed by the majority.
No material changes to the taxation of pensions, Inheritance Tax, Business Property and Agricultural Property reliefs, were made. The headline rates of Capital Gains and Income Tax also remained the same. There were no further changes to the taxation of non-UK domiciled individuals, which gives a welcome period of calm after the extensive changes that took effect in 2017 and 2018.
Originally announced in late 2017, the Chancellor confirmed that all non-UK resident companies that generate UK property income will be chargeable to Corporation Tax from 6 April 2020. This means that all the anti-avoidance provisions that apply to Corporation Tax (such as restrictions on the deductibility of interest and the use of losses) will apply to such income received by non-UK resident companies. Currently, non-UK resident companies with UK property income are subject to income tax. It was also confirmed that with effect from April 2019, Capital Gains Tax will apply to all gains realised on the disposal of all UK property (including land, residential and commercial property) even when owned by non-UK residents.
A consultation was announced on the imposition of an additional 1% Stamp Duty Land Tax surcharge to be imposed on non-residents acquiring residential property, which we will monitor with interest.
The Finance Bill 2019 will also include legislation which purports to make the Inheritance Tax (IHT) treatment of additions of assets to existing trusts clearer. There is currently some uncertainty as to whether additions by UK-domiciled individuals to trusts created while they were non-UK domiciled are covered by the excluded property rules. It is expected that the new rules will apply to IHT charges arising on or after the date of Royal Assent to the Finance Bill 2019.
The Chancellor also announced that a consultation will be launched to examine the taxation of trusts and how this can be made ‘simpler, fairer and more transparent’ which will be of interest to those clients with interests in trusts.
If you have any questions about the recent UK Budget then please do not hesitate to contact Paul Blackwell or your usual PraxisIFM contact.