Autumn Statement 2013 - Key Tax Provisions
There were some key tax changes announced in the detail of yesterday's Autumn Statement.
Capital Gains Tax Private Residence Relief - Final period exemption
Providing you've occupied a property as a main residence, you can qualify for the last 3 years of deemed occupation when calculating any Principal Private Residence relief. This applies even if you don't actually occupy the property and have a new main residence.
They propose to reduce the 3 year deemed occupation to 18 months as from April 2014.
There have been some interesting decisions of the Tax Tribunal covering PPR relief in the last few months. In particular how to establish when a property is a main residence, which we've looked at in this recent Practitioners article:
When is a property a main residence?
CGT, Non residents and UK residential property
After much press speculation they will be introducing a CGT charge on gains on disposals of UK residential property by non UK residents. Currently you can avoid CGT so long as (generally) you meet the 5 or 6 year non residence requirement. As from 6 April 2015 they are proposing that however long you are non resident for, gains on UK residential property would be subject to UK CGT.
However, it won't apply until 6 April 2015 and there will be a detailed consultation on how this will be achieved in 2014. Of key importance will be any grandfathering rules and whether there will be a rebasing election for existing property.
It's also worth noting that it appears to apply just to UK residential property. We'll also need to see whether this will also include shares in property holding companies.
Other issues yet to be determined will include whether it will mirror the position for ATED gains and whether PPR relief will be allowed for a former main residence.
You can see more on these points at:
Capital gains tax changes to non residents
A non resident may look to uplift the base cost prior to the introduction of any new rules (assuming the legislation doesn't provide for rebasing).
We've looked at crystallising capital gains as a non resident in more detail in these Practitioner/Platinum members articles:
Crystallising Capital Gains Offshore Tax-Free
Advanced options for cystallising capital gains
CGT Changes & Tax Planning Points To Consider
The new CGT charge on non resident individuals selling UK property will be a huge change. In our latest article we look at some of the key points that will need to be considered and how we think the new charge is likely to apply. You can read this at:
New CGT for non-residents and the top tax planning points to consider
CGT Annual Exempt Amount
The annual exemption will be £11,000 for the year 2014/2015 and £11,100 for 2015/2016 and subsequent years.
Dual Contracts
Non UK domiciliaries can often structure their employments into separate UK and overseas contracts. The benefit of this is that whilst the income from a UK employment is fully subject to UK income tax, the foreign employment income can be retained overseas to avoid UK tax if they claim the remittance basis.
The Autumn Statement provides that legislation will be introduced in Finance Bill 2014 to prevent non UK domiciliaries "creating an artificial division of the duties of one employment between contracts in both the UK and overseas".
They have previously provided details on how they will approach dual contract arrangements (see Latest guidance on dual contracts for non doms) and will now be tightening up the legislative provisions.
Further documents will be published on 10 December including draft clauses for Finance Bill 2014 and the relevant tax information notes. We'll review these and provide details in the members area of the website.
Transferable Personal Allowance
From April 2015, a spouse (or civil partner) who is not liable to Income Tax or not liable above the basic rate for a tax year will be able to transfer £1,000 of their personal allowance to their spouse or civil partner provided that the receiving spouse isn't liable to Income Tax above the basic rate.
This can result in a reduction in income tax for the receiving spouse of up to £200.
Pensions
For tax year 2014/15 onwards:
Business Tax
The Annual Investment Allowance will be increased from £25,000 to £250,000 for a 2 year period commencing from 1 January 2013.
A simpler income tax scheme for small unincorporated businesses will be introduced for the tax year 2013/14 to allow:
Inheritance tax
The IHT nil-rate band was frozen at its current level of £325,000 until April 2015. For 2015/16 the band will be increased by 1% rounded up to £329,000.
