For private client/trust practitioners, the draft 2014 Finance Bill clauses published on 10 December 2013 contained no great surprises, and were mainly interesting for what they did not include. We will have to wait until early next year for details of the proposed capital gains tax (CGT) charge on the disposal of UK residential property by non-UK residents, and there will be further consultation on HMRC’s controversial proposal to split a settlor’s nil rate band between all the trusts he or she has created.
The confirmation that the new CGT charge for non-UK residents will not come into effect until April 2015 will allow affected individuals time to consider their position and take any appropriate action. The Autumn Statement wording, implying that only gains accruing from the effective date would be taxed, was also encouraging.
Various alternative suggestions have been made to HMRC in relation to the splitting of the nil rate band between trusts, so the exact fate of ‘Rysaffe’ planning, using multiple trusts, remains uncertain, but it is to be hoped that the chosen solution will avoid the administrative complexity that would have resulted from the original proposals.
The proposed inclusion of income that has been accumulated for at least five years (instead of only two years) in the amount subject to the ten yearly inheritance tax (IHT) charge is obviously an improvement on the original proposals. However, it still falls far short of the much longer accumulation period proposed by practitioners, and it will result in increased ten yearly charges, particularly as tax will be charged at the full rate, irrespective of how long the income had actually been accumulated.
The extension of the CGT uplift provisions on the death of a vulnerable beneficiary with effect from 5 December 2013, and the extension of the range of vulnerable beneficiary trusts that qualify for special income tax, CGT and IHT treatment from 6 April 2014 are, of course, welcomed.
The halving of the current 36 months final period of ownership CGT exemption on disposal of a main residence for property disposals after 6 April 2014 may mean that some individuals who left a property before 6 October 2012 and who have not yet sold it will have a larger chargeable gain than anticipated. There are also anti-forestalling measures so that the 18 month final period will also apply where a sale is agreed before 6 April 2014 but not completed until after 6 April 2015.
The introduction of a new transferable personal allowance of up to £1,000 between spouses and civil partners who are not higher rate taxpayers, while better than nothing, will be of very limited benefit, and will add another administrative chore to employers, with the transfer being given effect via PAYE codes in most cases.