Pre Budget Report - The Highlights
The 9th October 2007 is clearly going to stand out in many Tax Advisers’ minds as one of those key dates in tax history, but unfortunately for all of the wrong reasons.
Dealing with the plus side first; the Inheritance Tax nil rate band is now transferable between spouses, which is good but only reflects what could be achieved with tax effective will drafting. The claim is available to surviving spouses and therefore provides backdated relief.
Now onto the real business!
Taper Relief & Frozen Indexation Allowance Abolished
So just 10 years after one of the biggest shake ups in the history of Capital Gains Tax (CGT) it is decided that taper relief should be withdrawn in favour of a flat rate of 18% regardless of how long an asset has been held or whether or not it is a business asset. So, for example, the tax due on an asset qualifying for the business rate of taper relief, taking a gain of £100,000 will almost double from £10,000 to £18,000 (an 80% rise). These proposals will not however take effect until 5 April 2008, providing a short window for planning.
Clearly action will be required, and those most likely to be affected are individuals, executors and trustees owning business assets and/or non business assets which have been held for several years. Although details of the proposed legislation will not be available until December, this should be possible with advance planning to “bank” claims to both Taper and Indexation Allowance.
Non Resident / Non Domicile
UK non domiciles will be faced with an annual tax charge of £30,000 on top of the tax due on income remittances, if they wish to continue to enjoy this basis of assessment. The tax charge will not bite until seven years have been spent in the UK and it is currently proposed to be applied to those who are UK resident but not domiciled. It remains to be seen how the proposed legislation will be extended to assets settled on trust or if, by becoming non resident for a year, this will then trigger a new seven year period in which remittance basis can be applied. Again, we will have to wait until December before the picture becomes clearer.
As if these plans were not enough, residency rules are to be tightened so that days of arrival & departure must be counted and the most popular methods of remittance planning outlawed.
If you would like to discuss any of these issues further please call and make an appointment with one of our personal tax experts.
Dealing with the plus side first; the Inheritance Tax nil rate band is now transferable between spouses, which is good but only reflects what could be achieved with tax effective will drafting. The claim is available to surviving spouses and therefore provides backdated relief.
Now onto the real business!
Taper Relief & Frozen Indexation Allowance Abolished
So just 10 years after one of the biggest shake ups in the history of Capital Gains Tax (CGT) it is decided that taper relief should be withdrawn in favour of a flat rate of 18% regardless of how long an asset has been held or whether or not it is a business asset. So, for example, the tax due on an asset qualifying for the business rate of taper relief, taking a gain of £100,000 will almost double from £10,000 to £18,000 (an 80% rise). These proposals will not however take effect until 5 April 2008, providing a short window for planning.
Clearly action will be required, and those most likely to be affected are individuals, executors and trustees owning business assets and/or non business assets which have been held for several years. Although details of the proposed legislation will not be available until December, this should be possible with advance planning to “bank” claims to both Taper and Indexation Allowance.
Non Resident / Non Domicile
UK non domiciles will be faced with an annual tax charge of £30,000 on top of the tax due on income remittances, if they wish to continue to enjoy this basis of assessment. The tax charge will not bite until seven years have been spent in the UK and it is currently proposed to be applied to those who are UK resident but not domiciled. It remains to be seen how the proposed legislation will be extended to assets settled on trust or if, by becoming non resident for a year, this will then trigger a new seven year period in which remittance basis can be applied. Again, we will have to wait until December before the picture becomes clearer.
As if these plans were not enough, residency rules are to be tightened so that days of arrival & departure must be counted and the most popular methods of remittance planning outlawed.
If you would like to discuss any of these issues further please call and make an appointment with one of our personal tax experts.
Labels: Written by Mark Busby
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