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AS 2015: The private client perspective

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‘Was that it?’ This seems to be the initial consensus about the Autumn Statement. Everyone likes the idea of debt continuing to fall and a projected budget surplus over the life of the current government, but we are still left with a feeling that there will have to be some revenue raising measures introduced to balance the books. The trouble is that it is not obvious where they will hit.

I am pleased to note the HMRC announcement that the use of deeds of variation will not currently be restricted. This will give comfort to those involved in IHT planning or dealing with estates where wills may not be reflective of current circumstances or family dynamics, or in cases of intestacy. This is a common sense approach that is welcomed, although there is the caveat that HMRC will continue to monitor their use and perceived abuse – how they will do that without any reporting mechanism will be interesting. Let us hope that the matter is dropped.

It is also good to see tax exemptions for non-resident athletes who wish to participate in international events being held in the UK. The relaxation of the rules on the taxation of sporting testimonials is also non-controversial and will not create an issue for the chancellor. The extra income generated by hosting these events is huge but is dependent on attracting world class participants.

Other generally welcomed measures are the confirmation of the extension of qualifying investments for the new innovative finance ISA and the consultation into incentives to increase investment into UK businesses for non-doms. With so much negative publicity around how the government has squeezed non-doms, it is good to see recognition of how important they can be to the UK economy, and we welcome this review which will hopefully encourage more use of this valuable relief. The restrictions to other venture capital reliefs are not so welcome.

With the restriction on loan interest relief on rental property and the general lack of affordable and starter homes, the introduction of a higher rate of SDLT on purchases of additional residential properties is an easy revenue generator. An additional 3% on top of current rates will have an impact at the lower end of the market and will hit the amateur investor rather than those operating at the volume end of the market, as they are exempted from the measures. The government will consult on the administration of SDLT, with the suggestion of a dramatic reduction in the filing and payment window to 14 days from 30 days, which would tend to suggest that this should just be dealt with as part of the conveyancing process.

We seem to have avoided the drastic restrictions to entrepreneurs’ relief that were predicted. It would have been perverse to have been seen to disincentivise entrepreneurs at a time when there are incentives to encourage investment into the UK. There does also seem to be a partial U-turn on previously announced provisions that restricted entrepreneurs’ relief within Finance Act 2015. We eagerly await the details.

CGT did not escape altogether, though. The positive news is that some anomalies within the rules for non-UK residents disposing of UK property have been removed. However, the introduction of payment of CGT on the disposal of UK property for UK residents within 30 days of disposal, rather than through self-assessment, is a huge change. This will accelerate the payment of tax for the exchequer and decrease the cash flow advantages for those planning a disposal early in a tax year.

HMRC continues to modernise its tax collection and information mechanism using digital technology. RTI has been with us for some time now. The intention is to further simplify the payment of tax, with HMRC calculating liabilities based on data it can access remotely and issuing a demand for payment that is legally enforceable. Accelerating the provision of information about property disposals that are chargeable to tax is part of the drive for HMRC to have more accurate information on a timely basis, thus enabling more accurate cash flow projections. What this means for tax practitioners is: change. We have to be even more collaborative with both HMRC and our clients to ensure that we are identifying events that will require disclosure and payment of tax on a real time basis. We cannot be passive advisers who simply file an annual tax return. We have to work closely with our clients to ensure compliance at all times.

At a high level, I am not surprised to see further commentary and tightening of the penalties for those regarded as serial tax avoiders. The tone of the measures and the level of penalties to be introduced – at 60% – will get public backing. Generally, there is still ignorance about the difference between illegal tax evasion and legal tax avoidance, with anyone entering into clever tax planning being tarred with the same brush. On a practical level, I question whether there is still the volume of serial tax avoiders entering into off-the-shelf structures that there once was, and whether these measures are simply to publicly reiterate HMRC’s stance against those schemes that are still being argued, with a view to encouraging more people to settle. The measures apply to reporting requirements on the ‘latest return’ where relief is claimed on what HMRC perceives to be a defeated scheme – we take that to mean one that it considers to be offensive, rather than one that has failed through the courts, as there would not be enough time to go through that process before submitting a return. We shall have to wait for clarification on that point.

Overall, it could have been worse, and there is a sense of relief that CGT and IHT were not targeted to the extent that many practitioners had predicted. The fear is that the chancellor could revisit those taxes outside the triple lock, if the budget savings outlined and the economic recovery are not as successful as the chancellor is currently predicting.