Partner Article

High net worth individuals and trustees – time to breathe easy?

The Draft Finance Bill brought some expected and unexpected changes for individuals and trustees, and as usual, some changes are welcome, others are not!

Social enterprises will benefit from an income tax relief on any investment (likely to be similar to EIS or VCT reliefs – so a range of 20% to 30%), and an exemption for capital gains tax. This will be of great benefit to these enterprises who often struggle to raise finance, and it is hoped that Government will give this relief the stability and longevity it needs.

The charge to capital gains tax on non-residents owning UK property is to be consulted on early next year, for introduction in April 2015, but one residential property change from April 2014 is the reduction in main residence relief in the final period.

Up to now, those needing to move before selling their main home had a period of 36 months before they would be subject to any tax on the gain. This has been reduced to 18 months, and could impact individuals differently across the country, depending on the activity of the local housing market.

The move is aimed at bringing more people into the charge to capital gains tax with relatively significant additional tax forecast (from £65m to £100m per annum).

Inheritance tax on trusts has been simplified, and the filing date for tax returns and the date for payment of tax, has been made clear – six months after the IHT event.

We’ve also had additional clarity on the amount chargeable to the ten year IHT charge which is now to include income accumulated for more than 5 years. Plus there will be more consultation on the controversial trust tax changes to calculation of the 10 year tax charge and the allocation of the nil rate band for multiple trusts created by one settlor.

There were other minor changes too, including the proposal for transferring £1,000 of personal allowances between married couples (worth £200 at most, it is more of a political move than a significant economic change), some alignment of CGT rules for vulnerable beneficiary trusts, correction to cultural gifts scheme and wider tax relief on loan interest to include EEA companies as required by European law.

Overall, a relatively benign set of changes which, in itself, are welcome after a number of years of big changes predominantly affecting wealthy individuals and trustees. Perhaps this is a result of the Chancellor acknowledging in his Autumn Statement speech that the wealthy already make a significant contribution to the total tax take.

This was posted in Bdaily's Members' News section by Baker Tilly .