Autumn Statement 2016: a private client perspective
In general, the 2016 Autumn Statement (the “Statement”) brought no significant ‘surprise’ announcements for private clients; indeed on the inheritance tax front the Statement was particularly quiet. Perhaps the biggest revelation was that this was Phillip Hammond’s first and last Autumn Statement.
The new Chancellor, Mr Hammond plans to reverse the Autumn Statement and the Spring Budget, which means that in future the tax budget will be announced in the autumn – well in advance of the start of the new tax year. This proposal is broadly regarded as welcome news and is in line with the advice of many professional bodies including the IMF. Importantly, it will allow for greater Parliamentary and external scrutiny of budget measures ahead of their implementation. Consequently, next year’s Spring Budget will be the last and from spring 2018 it will be replaced by a pared down Spring Statement which is intended to respond to the Office for Budget Responsibility’s Spring Forecast and will not generally deal with tax changes.
Phillip Hammond confirmed the introduction of significant reforms to the tax regime of individuals who are non-UK domiciled (“non-doms”), as previously announced by his predecessor, George Osborne. Despite some speculation that the reforms might be delayed, the Statement reiterated that these changes will take effect from April 2017. However whilst the Statement reaffirmed these measures it was not forthcoming on the detail of how these changes will work in practice therefore we will need to await the imminent publication of the Finance Bill 2017 for further clarification.
Broadly, the key changes to taxation of non-doms are twofold: first, from the tax year 2017/2018 non-doms will be treated as deemed UK domiciled for tax purposes once they have been resident in the UK for 15 of the past 20 tax years, bringing forward the onset of deemed-domicile status by a year. Secondly, UK residential properties held indirectly through an overseas structure, such as a company or trust, shall be subject to IHT where the beneficial owners of these structures are non-doms. More detail and commentary on these reforms can be found here.
Potentially more positive news for non-doms concerns the announcement that the rules governing Business Investment Relief shall be widened to encourage non-doms to bring money into the UK to invest in UK businesses. The Statement did not expand on how the relief will be widened but it is intended that the measures shall take effect from April 2017. The present rules enable UK resident non-doms (taxed on the remittance basis) to remit non-UK income or gains into the UK without negative tax implications where these funds are invested in UK trading limited companies.
Finally the Statement announced that, in relation to inheritance tax, the Finance Bill 2017 will extend the relief for donations to political parties to parties with representatives in the devolved legislatures, as well as parties that have acquired representative through by-elections. This is designed to ensure that all national parties with elected representatives are treated equally under the inheritance tax provisions.
In conclusion, although a lot of the substance of the Statement is not new, it is a reminder that many of the changes are complex and their impact potentially significant, so with the 6 April 2017 fast approaching you should take advice as soon as possible if you think these changes may affect you.
This guide is for general information and interest only and should not be relied upon as providing specific legal advice. If you require any further information about the issues raised in this article please contact the author or call 0207 404 0606 and ask to speak to your usual Goodman Derrick contact.