With most newspaper headlines focusing on tax credits, housing and spending plans, we thought it would be helpful to provide a summary of the, relatively few, tax issues arising out of yesterday’s Autumn Statement.
Stamp Duty Land Tax
Continuing the recent theme of measures aimed at those with more than one property, additional SDLT of 3% over and above the standard rates for residential property will be payable on let properties and second homes acquired on or after 1 April 2016.
To put this additional charge in context, a second home bought for £500,000 after this date will incur SDLT of £30,000, a 100% increase over the current position (and relevant properties with a lower value will see an even higher percentage increase). Those seeking to buy a second property would therefore be well advised to accelerate the purchase if at all possible.
Payment of Capital Gains Tax on the Sale of Residential Property
In a measure echoing the rules for the sale of UK residential property by non-residents introduced from 6 April this year, a payment on account of capital gains tax will need to be made by any individual selling a residential property, that does not qualify as their principal private residence, on or after 6 April 2019. Payment will be due 30 days after the sale of the property, and will represent a significant cash flow acceleration, given that currently the tax would be due on 31 January following the tax year in which disposal takes place.
When viewed with the SDLT changes outlined above, and the future restrictions already announced on the deductibility of loan interest from rental income, landlords have clearly been targeted as a major source of additional tax revenue. Needless to say, the cumulative impact on the buy-to-let market is expected to be substantial.
Deeds of Variation
Better news for taxpayers surrounds the use of deeds of variation, which have been used for many years, and not just for tax planning, to vary a will post-death to re-order gifts and bequests. After a review, it has been confirmed that the current rules, whereby any changes can be deemed to be treated as though contained in the original will for tax purposes, will remain unchanged.
Business Investment Relief
Further good news concerns the business investment relief that is available to those resident but not domiciled in the UK. Consultation is to be undertaken with a view to making this relief, aimed at providing a tax-efficient method for such individuals to invest in UK businesses, more attractive. The narrow scope of the current rules, introduced in 2012, has meant that that take up to date has been limited.
Further Anti-Avoidance and Anti-Evasion Legislation
The campaign to discourage the use of aggressive tax avoidance schemes and to clamp down on tax evasion, particularly offshore arrangements, is to be continued by the introduction of further measures.
These will include:-
- The introduction of criminal liability for serious cases of failing to declare offshore income and gains without HMRC having to prove any intent to evade tax
- Penalties for offshore tax evasion will also increase with the introduction of a penalty which is linked to the value of the assets involved and not just the tax evaded.
- Users of tax avoidance arrangements which are successfully challenged will have to pay a penalty of 60 per cent of the tax charged. In addition, people who persistently enter into failed tax avoidance schemes will be subject to a special reporting regime, a surcharge on additional tax payable, publication of their names and restrictions on using certain tax reliefs.
- Penalties will also be imposed on anybody who provides services which knowingly assists a UK taxpayer to evade UK taxes.
- A corporate criminal offence will also be introduced where a business does not take reasonable steps to prevent its employees/agents from facilitating tax evasion.
For further details of these proposals, or for more general advice on any tax issue, please speak to your Saffron contact, or get in touch via firstname.lastname@example.org.