On 1 May 2013, the Court of Appeal delivered a landmark decision which gives guidance on the way in which the English Courts will attempt to recognise and give effect to ideas of joint matrimonial property regimes arising under civil law jurisdictions.
In the 2012 Autumn Statement, the Chancellor of the Exchequer confirmed plans (first announced in September 2012) to use of the public procurement process to deter tax avoidance and evasion. A discussion document and draft guidance for consultation followed in February 2013 and on 20 March 2013, in the 2013 Budget report, the government confirmed that the new policy would be introduced from 1 April 2013.
A seismic change will be made to the UK tax system by the introduction of a general anti abuse rule (GAAR). A particular feature of the GAAR legislation is a requirement of any Court or Tribunal to take into account guidance approved by an Advisory Panel.
HMRC has changed its view on the NICs liability of sleeping and inactive limited partners. It now considers that they are liable for Class 2 & 4 NICs.
We now have the detail of the new provisions which will deny a deduction for certain debts in calculating the value of a person’s estate for inheritance tax purposes. As expected, where a non-domiciled individual (or the trustees of his trust) borrow from a bank secured on a UK property and deposit the borrowed funds on a back to back basis (or use them for investing offshore) the debt will not be allowable on the individual’s death. This will increase the inheritance taxable estate. Nor will the debt be allowable in calculating inheritance tax charges in the trust.
Non-UK domiciled individuals will be able to elect to be treated as domiciled in the UK for inheritance tax (‘IHT’) purposes under provisions contained in the draft Finance Bill 2013, published in December 2012. Where an election is made, gifts made by a UK domiciled spouse to his non-UK domiciled spouse will be free from UK IHT.
Changes to the measure announced at the time of the 2013 Budget mean that lifetime gifts made within the seven years before death will now also be able to benefit from the full spouse exemption even if no election was in place at the time of the gifts.
Michael Wistow, Head of Tax, shares his thoughts on how this Budget is likely to be received in the City, if it will create a simpler UK tax code and highlights some of the more disappointing aspects of the announcements.
Borrowings secured against properties reduce their value for inheritance tax purposes, with only the net value being taxable. Damian Bloom, Private Client partner discusses new restrictions on the set-off of debts, if the borrowed money is used to buy assets which qualify for inheritance tax relief, or is taken offshore by a non-UK domiciled individual. This will have a significant impact on entrepreneurs using their houses as security for borrowings used in their businesses, as well as non-domiciliaries putting in place inheritance tax planning.
The Chancellor unveiled a package of measures to support SMEs and entrepreneurs, including a single, reduced rate of corporation tax of 20% from April 2015, an employer’s NICs reduction of £2k for all UK employers, measures to help fundraising (including more lending support and the abolition of stamp duty on AIM listed shares) and new and improved reliefs to encourage employee ownership. On the downside businesses will need to watch out for a crackdown on using LLPs to avoid national insurance and a tightening of the rules allowing a corporation tax deduction for employee share acquisitions.
From Royal Assent of Finance Bill 2013, some debts will not be deductible in calculating an individual’s liability to inheritance tax on their death – this will impact on non-UK domiciled individuals (and their trusts) who take out borrowings secured on UK assets to reduce their value for inheritance tax, and on entrepreneurs.
The Channel Islands and the Isle of Man have all agreed to enter into ‘mini-FATCA’ agreements with the UK. The agreements will provide for automatic exchange of information in relation to accounts held by UK resident individuals. Disclosure facilities, allowing UK resident individuals with undeclared UK tax liabilities to disclosure those liabilities to HMRC on beneficial terms, will run alongside the information exchange agreements.
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