Chancellor George Osborne presented his Autumn Statement, along with the Spending Review, on November 25. It did not include many tax changes this time. This article summarises the announcements that may affect expatriates, depending on your situation.
Capital gains tax due date – sale of residential property
With effect from April 6 2019, payments on account of UK capital gains tax on residential properties will be due within 30 days of the date of sale. Currently sellers have between 10 and 22 months to pay.
This affects both residents and non-residents (non-residents have been liable to capital gains tax on residential property since April 2015). However, it will not apply to properties used as a principle private residence in the UK.
Stamp duty land tax
From April 1 2016, where UK residential properties are acquired as either second homes or buy-to-let properties, stamp duty land tax will increase by 3%. This is expected to raise almost £1 billion by 2021.
This only affects new purchases from that date, so you are not affected if you already own a UK property. If you are thinking of buying one, if you do not immediately use it as your main home you will probably have to pay this additional tax. You therefore need to consider the additional cost – even the cheapest properties will be subject to stamp duty land tax under this change. Alternative investments may be more cost-efficient.
It is proposed that from April 6 2017 the tax will be due within 14 days of the transaction.
Deeds of variation
The 2015 Summer Budget included a proposal to curtail deeds of variation, since they have been used to minimise or avoid UK inheritance tax.
Mr Osborne now announced that there will be no change to the use of deeds of variation, although they will monitor the situation to see how people use them to change their inheritance tax position.
Deeds of variation can be useful, and can also help with assets skipping generations for UK inheritance tax. Estate planning is a complex area, you should seek professional advice.
Tax evasion crackdown and General Anti-Abuse Rule (GAAR) penalties
HM Revenue & Customs will invest an extra £800 million to fight tax evasion.
The government has committed to raise an additional £5 billion a year by 2019-20 from cracking down on tax evasion, non-compliance, aggressive tax planning and imbalances in the system.
Mr Osborne outlined some measures that will be included in the 2016 Finance Bill. These include a new criminal office removing the need to prove intent for serious cases of offshore tax evasion on income and gains, and civil penalties for deliberate offshore tax evasion.
As announced in the Autumn Statement, where GAAR is successfully invoked the penalties will increase to 60% of the tax due. This should only concern those who have used abusive means of avoiding tax.
It is worth noting that the Liechtenstein, Jersey, Guernsey and Isle of Man disclosure schemes will close early to new notifications – on December 31, 2015 instead of the original dates. This is because the new global automatic exchange of information regime under the Common Reporting Standard starts in January 2016 (with the first information exchange in 2017).
Time is running out, but for those who need to regularise their affairs, taking action now can avoid more serious penalties and sanctions in future.
UK state retirement pension
From April 6 2016, the basic UK state retirement pension will increase to £119.30 per week. A new, single-tier system will come into place at that date, which gives an overall minimum state pension (including what would have been SERPS etc under the old system) of just over £155 per week.
Finance Act 2016
We now await the draft legislation for the Finance Act 2016, which is due to be released on December 9. It is expected to contain information about:
▪ How dividends will be taxed under the new regime.
▪ How the new savings allowance will work (as all bank and building society interest will be paid gross from April 6 2016 under the proposals).
▪ Removal of wear and tear allowance on furnished rental property.
▪ Deemed domicile status changes.
▪ UK inheritance tax for non-UK domiciles.
This is just a summary, and more detail tends to emerge later. It is important to seek specialist advice if you are affected, particularly when it comes to the interaction between UK and Portuguese taxation, and the tax planning opportunities available.
Tax rates, scope and reliefs may change. Any statements concerning taxation are based upon our understanding of current taxation laws and practices which are subject to change. Tax information has been summarised; an individual is advised to seek personalised advice.
By Gavin Scott
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Gavin Scott, Senior Partner of Blevins Franks, has been advising expatriates on all aspects of their financial planning for more than 20 years. He has represented Blevins Franks in the Algarve since 2000. Gavin holds the Diploma for Financial Advisers. | www.blevinsfranks.com
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