The Chancellor has delivered his Autumn Statement and Spending Review.

Deeds of variation: still alive and kicking!

Having reviewed the use of deeds of variation to mitigate inheritance tax (IHT), the government has decided not to introduce new restrictions on how deeds of variation can be used for tax purposes but will continue to monitor their use.

It will, therefore, continue to be possible to change the way in which a person’s estate is distributed following their death and for the varied gifts to be treated, for IHT tax purposes, as if they had been made by the deceased. The variation must be made within 2 years of the deceased’s death.

Disclosure facilities: no news on the terms of the ‘last-chance’ facility

We know that the UK’s existing disclosure facilities (the Liechtenstein Disclosure Facility and the UK’s existing disclosure facilities with Jersey, Guernsey and the Isle of Man) will close on 31 December 2015. We have yet to be told the details of the ‘last-chance’ disclosure facility which will be available to taxpayer’s between 1 January 2016 and mid-2017.

The government announced in March 2015 that penalties of at least 30% on top of the tax owed and interest would be payable under the new disclosure facility and that there would be no immunity from criminal prosecution, but no further details have emerged since then.

Entrepreneurs’ Relief

Despite rumours of restrictions to Entrepreneurs’ Relief no plans to remove or restrict the relief were announced.

Entrepreneurs’ Relief reduces that amount of capital gains tax that a person pays when he sells (or gives away) certain business assets. The effect of the relief is that the first £10m of gains realised on the sale (or gift) is taxed at 10%. Gains in excess of the £10m limit are taxed at the person’s normal rate of CGT (currently 18% or 28%). The relief can also apply to sales by trustees. The £10m limit is a lifetime cap so the relief can apply to more than one disposal.

Residential property

Inheritance tax: no further details have yet been provided on the proposed extension of UK inheritance tax (IHT) to all UK residential property held by non-UK domiciled individuals (‘non-doms’) whether held directly or indirectly (e.g. via a non-UK company). We anticipate that the consultation paper on this proposal will be published on 9 December along with draft Finance Bill 2016 clauses.

Currently, UK assets held by a non-dom (or a trust set up by a non-dom) through a non-UK company are not subject to UK inheritance tax. From April 2017, all UK residential property held by a non-dom, whether directly or indirectly, including UK residential property held by offshore companies, offshore trust and company structures and non-UK partnerships will be subject to UK inheritance tax.

Stamp duty land tax (SDLT): From April 2016, higher rates of SDLT will be charged on purchases of additional residential properties, such as buy to let properties and second homes. The higher rates will be 3% above the current SDLT rates. The higher SDLT rates will not apply to corporates or funds making significant investments in residential property. The government will consult on the policy detail, including on whether an exemption for corporates and funds owning more than 15 residential properties is appropriate.

Capital gains tax (CGT): currently taxpayers have between 10 and 22 months to pay any CGT due on the sale of residential property. From April 2019, any CGT will have to be paid within 30 days of the sale.

Tax evasion: criminal offence of failing to prevent tax evasion

The government has confirmed that it will press ahead with the introduction of new criminal offences for tax evasion, including a new criminal offence for corporates that fail to prevent their agents from knowingly facilitating tax evasion by any individual or entity.

The consultation paper published in Summer 2015 indicated that this offence would apply to corporations with presence in the UK and to non-UK corporations whose agents criminally facilitate evasion of UK taxes.

Corporates that take reasonable steps to put in place adequate compliance procedures to prevent the criminal facilitation of tax evasion by their agents will have a defence to the offence. Whether or not reasonable steps have been taken will be determined on case-by-case basis, but it is likely that the corporate’s policies and procedures, any published guidance, its contractual terms for staff, training of staff and the steps taken to monitor compliance (e.g. peer-to-peer audits) will be considered.

Significant changes to the taxation of non-doms

No further details of the significant changes to the taxation of UK resident non-doms, which will take effect from 6 April 2017, have been provided.

The consultation on these changes closed on 11 November 2015. However, in light of the major concerns that we, and others, raised with the government on many aspects of the proposals it is unlikely that the government will provide further details until the New Year.