Tag: private client

What next for tax agents with the new Labour Government? Wealth Briefing

Posted on by Alicia Sprott

Manifestos unveiled in the weeks before the election outlined each party’s intentions should they have won. But the reality is that we won’t truly have a clear picture of the new government’s tax plans until the first Autumn Statement later this year.

This leaves tax agents with uncertainty regarding tax advice. Clients affected by any potential changes to VAT charges on school fees, Capital Gains Tax (CGT) or changes to the non-dom regime for example, will naturally have queries.

Offering a broader commentary on this issue, Katharine calls for a more honest and productive conversation about taxation, particularly against the backdrop of the UK’s current financial situation. Katharine goes on to share insights into some possible and practical options that the new government may have to consider in the coming years. You can read more on Wealth Briefing here.

We’re advising clients in anticipation of the next Budget that decisive action in advance of any tax changes may be their best course of action. For further advice, contact Katharine Arthur directly.

Navigating tax policies amid political change – Wealth Briefing

Posted on by Alicia Sprott

Key concerns

Katharine focuses on some key areas affected by the change in government, including:

  • Election promises and tax system: The election campaign featured significant tax changes yet detailed policy frameworks were often lacking. Early policy changes might be expected, but minor adjustments like increasing ‘stealth taxes’ could worsen the existing problem rather than simplifying it.
  • Short-term vs long-term solutions: Short-term policies can address immediate economic issues but shouldn’t overshadow the need for long-term tax system reform. Simplification should be a guiding principle, with a focus on reducing administrative burdens.
  • Impact on individuals and advisors: The uncertainty of new policies has led some individuals to seek stability by moving out of the UK or reconsidering major financial decisions. Advisors must provide transparent advice, helping clients make informed decisions despite the uncertainty.

Katharine comments that the new Labour Government must focus on creating clear, well-communicated policies that not only address immediate issues but also consider the long-term resilience and simplicity of the tax system. By doing so, it can build a foundation that supports effective tax planning and administration, benefiting all users of the tax system across political divides.

For more detailed insights from Katharine, you can read the full article on WealthBriefing here.

For further advice

As we wait for the new Chancellor’s Budget sometime in autumn 2024, for further advice or guidance on the proposed tax changes and how they may affect, please get in touch with Katharine Arthur directly.

Podcast: General Election 2024 – Labour’s tax policies

Posted on by Alicia Sprott

Whilst we wait for the Budget from the new Chancellor in the autumn, Katharine Arthur, Partner and Head of Private Client, James Walker, Partner and Duncan Cleary, Manager, discuss Labour’s tax policies and what this could mean for you.

Click to listen below. You can also listen on Apple Podcasts, Google Podcasts, and Spotify.

You can read more on our General Election tax policy round up below:

Labour Government tax policies

Posted on by Alicia Sprott

We focus here on the pledges made by the Labour Party in its manifesto.

For the details behind some of the headlines, we’ll have to wait for a Budget and publication of draft legislation, likely to be September at the earliest.

So, what do we know so far?

Personal taxes

Income Tax

  • No increases to the rates of Income Tax or National Insurance for the life of the next Parliament but the freezing of thresholds until 2028 has also been confirmed.

The non-UK domicile regime

  • Abolition of remittance basis of taxation for ‘non-doms’.
  • New residence-based regime: no UK tax on Foreign Income and Gains (FIG) for first four years of UK residence, provided taxpayer has been non-tax resident for the last 10 years.
  • Inheritance Tax (IHT): move to a residence-based regime from April 2025.
  • Non-UK situs assets will be subject to IHT if the owner has been UK tax resident for 10 years or more. This will remain the case for 10 years after ceasing to be UK tax resident (the 10-year tail).
  • Offshore trusts: new trusts and additions to existing trusts made by a non-UK domiciled settlor on, or after, 6 April 2025 will be subject to new residence-based rules. The protection from tax on non-UK source income and all capital gains arising within settlor-interested trust structures will no longer be available for non-UK domiciled individuals unless they qualify for the new four-year FIG regime.
  • Trusts: all assets held within a trust to be subject to IHT (subject to settlor being UK resident for 10 years).
  • Investment incentive during the four-year arrival window so that UK investment income is free of UK tax.
  • Further details:

Private equity

  • Increase rate of Capital Gains Tax (CGT) on carried interest to equal income tax rates or tax as income.

Inheritance Tax

  • No announcements, except for the non-UK domicile regime as above.

Capital Gains Tax

  • No announcements but no pledge not to increase rates.

Corporation Tax

  • Cap the main rate at 25%.

VAT

  • No increase to the rate of VAT.
  • Add VAT to school fees. You can read more here.

Manifesto

For full details, as published by the Labour Party, please see here.

Contact Katharine Arthur, Partner and Head of Private Client, if you wish to discuss how these proposed tax policies will affect you.

 

Labour’s 2024 Manifesto: Key changes to non-dom taxation and offshore trusts

Posted on by Alicia Sprott

There’s no surprise – it makes clear that the UK’s tax regime for non-doms will change, replaced by a “modern scheme for people genuinely in the country for a short period”. Most commentators expected the majority of the 2024 Spring Budget proposals put forward by the current Government to be adopted by the Labour Party, with perhaps some tweaks.

However, there are some firm commitments made in the Labour Manifesto, which were previously announced, but are now written down as commitments:

  • Labour will not introduce the proposed 50% discount for ‘foreign income’ in 2025/26; and
  • Most significantly, Labour will be bringing offshore trusts within the scope of Inheritance Tax (IHT) against current practice and the 2024 Spring Budget proposals.

It was the second of these that had caused most concern to many of the country’s wealthiest non-doms, who immediately began to seriously consider bringing forward their departure from the UK. However, depending on how the new rules are drafted, even leaving now may not prevent exposure to IHT for non-doms and their trusts, regardless of how closely linked to the UK they are.

For those who may be affected, our two articles for individuals and for those with offshore trust structures are now even more important than before (if that’s possible), especially for the trustees of potentially affected trust structures.

For further advice, please contact James Walker, Private Client Partner.

General Election 2024: What do we know about proposed tax changes?

Posted on by Alicia Sprott

Updated: 13/06/24

We focus here on the announcements made so far by the Conservative and Labour Parties, as included in their manifestos.

For the details behind some the headlines, we’ll have to wait for a Budget and publication of draft legislation, likely to be September at the earliest.

So, what do we know so far?

Personal taxes

Income Tax

  • Conservative and Labour: no increases to the rates of Income Tax or National Insurance for the life of the next Parliament but both parties have also confirmed the freezing of thresholds until 2028.
  • Conservative: a ‘triple lock plus’ for UK pensioners. Pensioners would benefit from a future increased personal tax allowance, in order to ensure the basic state pension does not become subject to Income Tax.
  • Conservative: the income threshold for the High Income Child Benefit Charge (HICBC) will double to £120,000.

The non-UK domicile regime

  • Conservative and Labour:
    • Abolition of remittance basis of taxation for ‘non-doms’.
    • New residence-based regime: no UK tax on Foreign Income and Gains (FIG) for first four years of UK residence, provided taxpayer has been non-tax resident for the last ten years.
    • Inheritance Tax (IHT): move to a residence-based regime from April 2025.
    • Non-UK situs assets will be subject to IHT if the owner has been UK tax resident for ten years or more. This will remain the case for 10 years after ceasing to be UK tax resident (the 10-year tail).
    • Offshore trusts: new trusts and additions to existing trusts made by a non-UK domiciled settlor on, or after, 6 April 2025 will be subject to new residence-based rules. The protection from tax on no-UK source income and all capital gains arising within settlor-interested trust structures will no longer be available for non-UK domiciled individuals unless they qualify for the new four-year FIG regime.
  • Conservative:
    • A temporary 50% exemption for the taxation of foreign income for the first year of the new regime.
    • Two-year Temporary Repatriation Facility (TRF) to bring previously accrued FIG into the UK at a tax rate of 12%.
    • Offshore trusts: trusts settled and funded before April 2025 by a non-UK domiciled settlor would have the ability to remain outside the scope of IHT regardless of the settlor’s status.
  • Labour:
    • Trusts: all assets held within a trust to be subject to IHT (subject to settlor being UK resident for 10 years).
    • Investment incentive during the four-year arrival window so that UK investment income is free of UK tax.
  • Further details:

National Insurance

  • Conservatives: 2% cut to the rate of employees’ National Insurance (NI) by April 2027 with plans to abolish employees’ NI in the longer term and to abolish the main rate of self-employed NI by the end of the next Parliament.

Private equity

  • Labour: increase rate of Capital Gains Tax (CGT) on carried interest to equal income tax rates or tax as income.

Inheritance Tax

  • No announcements, except for the non-UK domicile regime as above.

Stamp Duty Land Tax (SDLT)

  • Conservative:
    • £425,000 tax free threshold for first time buyers to be made permanent.
    • Introduce a new help to buy scheme to provide first time buyers with an equity loan of up to 20% of the cost of a new build home.
    • No changes to the rate.

Capital Gains Tax

  • Conservative:
    • Introduce a two-year temporary Capital Gains Tax relief for landlords who sell to their existing tenants.
    • No increase to the rate.

Pensions

  • Labour: re-introduce Lifetime Allowance for pensions, abolished in the March 2023 Budget. The Lifetime Allowance (£1.073m) was a limit on the total value an individual’s private pensions could reach before tax at up to 55% was levied on a pension withdrawal or on reaching age 75.
  • Conservative: a ‘triple lock plus’ for UK pensioners, as above.

Corporation Tax

  • Labour: Cap the main rate at 25%.
  • Conservative: No increase to the rate(s).

VAT

  • Conservative and Labour: no increase to the rate of VAT.
  • Labour: add VAT to school fees. You can read more here.

We will add further details as we receive them, together with a summary of actions you may wish to consider in advance of the General Election, or certainly the next Budget.

Manifestos

For full details, as published by the political parties, please see:

The SNP manifesto is still to follow.

Contact Katharine Arthur, Partner and Head of Private Client, if you wish to discuss how these proposed tax policies will affect you.

Offshore trustees and non-doms: Key UK tax strategies for summer 2024

Posted on by Alicia Sprott

Our main concern is that the nine-month window is very tight, especially for non-UK resident trustees. Restructuring potentially affected trusts to mitigate the full effects of the changes could carry significant risks that must be managed carefully and fully understood. This is particularly true for settlors who are UK resident but not UK domiciled (even if they are ‘deemed UK domiciled’ for UK tax purposes), and who have not decided to leave the UK before 6 April 2025, as they will face the consequences of the changes.

We recommend that trustees, the settlor and beneficiaries focus on the following aspects as soon as possible:

  • The settlor should review their common law ‘domicile’ status to ensure there remains a strong argument that they have retained a non-UK domicile status. This is going to be essential before any restructuring work can be carried out.
  • The trustees should also confirm the structure has not been ‘tainted’;
  • Subject to (1) and (2), the trustees should consider triggering unrealised capital gains to rebase assets and, where possible, bring forward non-UK source income before 6 April 2025 while the trust still qualifies for Protected Trust status; and
  • Look at the options of investing through tax wrappers that may defer UK tax (e.g., offshore investment bonds).

In some cases, there will also be the need to consider the ‘motive defences’ under both the Income Tax and Capital Gains Tax provisions, but one step at a time…

If trustees and settlors wait until the legislation is drafted, likely in autumn 2024, it will leave very little time to carry out the required review and implement any proposed plans. There may also be new legislation that prevents any restructuring.

Our Private Client & Trusts team have a wealth of experience and knowledge on the UK tax regimes for non-doms and offshore trust structures and will stay on top of important updates. For further advice, please get in touch.

Non-doms: Key UK tax strategies for summer 2024

Posted on by Alicia Sprott

For offshore trustees, please see our article here for our suggested strategy.

This is a good opportunity to reflect on the actions we feel that non-doms should take over the summer, given, at the time of this post, we have less than nine months until the proposed regime may come into effect.

For those without an offshore trust structure as part of their personal wealth – or where there is material personal wealth outside the structure – there are still some very important decisions to make over the coming months.

We have explained the potential new regime here, so we won’t repeat them in this post. Instead, we want to simply reflect on the actions we feel that non-doms should consider taking over the summer.

There are likely to be opportunities for those who are still able to claim the remittance basis in 2024/25 to restructure their investments before 6 April 2025 to mitigate the full effects of the changes and perhaps even significantly reduce their UK tax exposure from 2025. However, since restructuring is reliant on having retained your non-UK domicile status, we recommend a formal review of your domicile position, collating evidence to support your claim to being domiciled outside of the UK. We expect HMRC to be quite aggressive with its enquiries into domicile status for those claiming the remittance basis in 2024/25. Therefore, having a formal report supported by contemporary evidence demonstrating your non-UK domicile status will be your best defence against a challenge from HMRC. A successful challenge by HMRC to a non-UK domicile in 2024/25 could cause them to revisit earlier years.

Once this review is successfully completed, we recommend evaluating your investments/assets for restructuring opportunities, such as realising unrealised capital gains and/or bring forward income where possible. We also recommend exploring future investment options that may permit a deferral on your UK tax liability once the changes come into effect, such as life insurance investment bonds.

You should also consider how to use the proposed Temporary Repatriation Facility (TRF) to make the most of what is likely to be a 12% tax rate (versus the current maximum of 45%).

Perhaps the single biggest concern of most non-doms will be the potential Inheritance Tax (IHT) implications, should you decide to stay in the UK. Although the proposals are very vague at present, at 40% of your personal wealth, this is not an aspect to brush over.

If you wait until the legislation is drafted, likely in autumn 2024, it will leave very little time to review both your domicile status and the options available.

Our Private Client & Trusts team have a wealth of experience and knowledge on the UK tax regime for non-doms and offshore trust structures, and will stay on top of important updates. For further advice, please get in touch.

The future of the non-domicile tax regime – Taxation

Posted on by Alicia Sprott

Katharine and Duncan outline the complexities and uncertainties surrounding current proposals by both the Conservative and Labour parties regarding the taxation of non-domiciled residents in the UK.

The upcoming General Election and subsequent legislation will likely redefine the landscape for non-UK domiciled individuals, with significant changes planned to start by 6 April 2025. The current debate suggests a shift from a domicile-based system to a residence-based regime, potentially ending the remittance basis of taxation. The proposals include transitional arrangements for existing non-doms and plans for a new tax treatment for foreign income and gains.

Katharine and Duncan advocate for a simplified, more efficient tax system that can handle these changes without increasing the administrative burden on taxpayers and  HMRC. Katharine says: “The complexity currently witnessed in our tax system is unmanageable. It’s crucial that the next government prioritises simplifying these rules,” says Arthur.

To read the analysis in full, you can read the full article on Taxation here (free subscription needed).

Non-domicile tax advice

We’re advising all those with a non-domicile status to be prepared – don’t wait until the changes are implemented as it may be too late to protect your non-dom status and assets at that point. For further advice, contact Katharine Arthur or Duncan Cleary directly.

Partnerships with corporate partners eligible for full expensing

Posted on by Alicia Sprott

HMRC confirmed in early 2024 that partnerships with corporate partners (also known as mixed partnerships) are now able to claim capital allowances which have previously only been available to companies within the charge to Corporation Tax.  The capital allowances are first year allowances such as full expensing.

Full expensing allows companies (and partnerships with corporate members) to immediately deduct the entire cost of qualifying capital expenditures from their taxable income, in the year of purchase. This contrasts with traditional capital allowance methods, where the cost is spread out over several years. For partnerships with corporate members, investments in assets, such as machinery, equipment, or vehicles, can result in receiving tax relief (at up to 25%) on these investments immediately, which can alleviate the cash flow issues of investment. Consequently, more funds become available for reinvestment in the business or distribution to partners.

In conclusion, partnerships with corporate members in the UK stand to benefit significantly from full expensing.

Tax implications

The implications of these tax incentives are extensive for partnerships. By encouraging investment in critical assets, the Government aims to foster business growth and competitiveness. For partnerships with corporate members, these incentives translate into enhanced financial performance and increased flexibility in capital allocation. With reduced cash flow constraints, partnerships have the opportunity to invest in innovation, expansion, or infrastructure improvements, all of which can contribute to long-term success.

However, to fully capitalise on these incentives, partnerships must ensure compliance with relevant tax regulations. This involves accurately identifying qualifying capital expenditures, maintaining thorough records, and adhering to reporting requirements set by HMRC legislation. Given the complexity of tax planning, partnerships may benefit from seeking guidance from tax professionals or accountants to navigate the intricacies of these incentives and optimise their tax strategy.

In conclusion, partnerships with corporate members in the UK stand to benefit significantly from full expensing and super-deductions. These tax incentives provide valuable opportunities for partnerships to enhance their financial position, drive investment, and contribute to economic growth. By leveraging these incentives effectively and ensuring compliance with regulatory requirements, partnerships can position themselves for sustained success in an increasingly competitive business environment.

For advice on these issues and capital allowances for partnerships generally, please contact Kiran Chotai, Private Client Senior Manager.

Get in touch