Private Client legal update
The Finance (no.2) Bill 2017
Following the Prime Minister’s decision in May this year to call a snap general election, the Government had to drop over 70 provisions from the Finance Bill 2017 (subsequently the Finance Act 2017) in order to pass vital elements of the legislation before Parliament was dissolved.
To enact the withdrawn measures, the Government needed to produce a second bill. Consequently, the long-awaited Finance (No. 2) Bill 2017 (“the Bill”) was finally published on 8 September 2017 passing its second reading on 12 September 2017. Despite the Conservative Party forming a minority government, the new provisions were passed by 320 to 299 votes and the Bill is expected to receive Royal Assent by the end of this year.
There are very few surprising changes or additions to the draft Bill, in fact we previously wrote about two of the key new measures introduced by the Bill in October last year (click here):
- The Bill includes new rules which introduce the payment of inheritance tax on residential properties in the UK, which are indirectly held by non-domiciled individuals (“non-doms”) through overseas structures, such as companies or trusts.
- In addition, the long-anticipated provisions to alter the rules regarding the deemed UK domicile status of resident non-doms are contained within the Bill. This reform effectively brings forward the onset of deemed-domicile status by a year, so that a non-dom 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. An individual who becomes deemed domiciled here is subject to UK inheritance tax on their worldwide estate.
Significantly, it has now been confirmed that the above measures will have retrospective effect from the 6 April 2017, the date they were originally due to be implemented. This provides welcome clarity to non-doms, many of whom had already undertaken tax planning and restructuring in advance of the new tax year.
Fortunately, since the election, there have been no further announcements regarding the proposed introduction of probate fees based on the value of the estate, as opposed to the current system which imposes a fixed fee. Although, it is not yet clear if these plans have been dropped completely or simply suspended.
Residence Nil Rate Band
A further important consequence of the Conservative Government being re-elected is that there will be no changes to the already enacted Residence Nil Rate Band provisions for deaths that have taken place after 6 April 2017 (click here to see our January 2017 GD Online article) .
If you think you may be affected by any of these provisions, and you wish to review your tax position, we would be happy to advise you regarding the impact of these changes.
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.