In the midst of all the speculation about what might happen at the general election, it is easy to forget that there has recently been both a Budget and a Finance Act, the latter passed in record time. Some of the measures relevant to private clients and trusts now in force include:
- Individuals over the age of 55 have flexible access to their defined contribution pension savings.
- If someone dies before age 75, they can now pass on unused defined contribution pension savings tax-free to a wider range of beneficiaries.
- Spouses can now inherit their deceased partner's ISA benefits.
- A new annual remittance basis charge of £90,000 has been introduced for non-doms who have been UK resident for at least 17 of the last 20 years, and the charge paid by those who have been resident for at least 12 of the last 14 years has increased from £50,000 to £60,000.
- Non-UK resident individuals, trusts, PRs and narrowly controlled companies will now pay CGT on gains arising after April 2015 on the disposal of UK residential property.
- New restrictions apply to the CGT principal private residence relief. This will only now be available if the property is situated in the country where the owner or their spouse is tax resident, or if the owner or their spouse spend at least 90 nights in the property during a tax year.
- A new ATED band for properties worth between £1m and £2m has been introduced and the charges across existing bands have increased. The CGT charge on disposals of properties liable to ATED also now extends to residential properties worth between £1m and £2m.
- The CGT exemption for assets deemed to be wasting assets because they qualify as plant used in a business now only applies to assets used in the seller's own business. This is aimed squarely at minimising effects of the 'Castle Howard' decision which allowed relief for a painting on display at a stately home which had been used by someone else for business purposes.
- Individuals are no longer able to claim Entrepreneurs' Relief (ER) on the disposal on or after 18 March 2015 of personal assets used in a business carried on by a company or a partnership, unless they are disposed of in connection with the disposal of at least a 5% shareholding in the company, or a 5% share in the partnership assets. Because of the precise wording of the new legislation, this change may have unexpected and probably unintended consequences for family partnerships. When, under standard partnership provisions, a partner dies or retires the other partners may have an option to acquire his share. In that case, however, ER may no longer be available on the disposal of the associated asset. A similar problem could arise for family companies (eg those carrying on the farming activity) if the Articles of Association provide for the shares of a deceased or outgoing member to be acquired by the continuing members. Representations are being made to the Government and it is hoped that this legislation will be amended.
- The requirement that 70% of Seed Enterprise Investment Scheme money must be spent before EIS or VCT funding can be raised has been removed.
This article originally appeared in our Private Client & Tax Spring Newsletter.
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