UK Budget comment
Friday 24 March 2017
Following UK Chancellor Philip Hammond’s final Spring Budget announcement, Jersey based Senior Tax Consultant Harry Lawson reflects on some of the highlights impacting Channel Island residents.
UK Chancellor Philip Hammond has delivered what will be the final Spring Budget before the UK moves to having an annual Autumn Budget beginning this year. Most commentators were not expecting the Spring Budget to be laden with ‘wow factor’ announcements and, suffice to say, the Chancellor lived up to the low expectations. It comes to something when the biggest announcement is the fact that there are to be no further rises in alcohol and tobacco duties other than those already in the pipeline.
Taking aside the usual fiscal ‘state of the nation’ and social commentaries there were not that many new tax-related announcements that would be of interest or have an effect on Channel Islands residents. As is now the norm, many tax announcements were slipped out via the UK Government website as soon as the Chancellor had finished his speech.
With a few slight adjustments the previously announced reforms of the Domicile and Inheritance Tax rules will go ahead and be effective from 6 April 2017. This will be disappointing to many who will be affected by these changes particularly as the legislation is not yet finalised. Please note that the UK Government have recently announced that the UK Domicile and Inheritance tax reforms have been put temporarily on hold until after the UK General Election in June 2017. Whilst the UK government seem intent on pushing through the reforms this delay only adds to the uncertainty felt by many people who could be affected. Equiom will be making further announcements on this issue as soon as we have more information.
As announced in the Autumn Statement 2016 there will be a consultation exercise exploring the options of bringing Non-UK Resident Companies within the scope of UK Corporation Tax. Under such a move affected companies would become subject to the rules that apply generally to Corporation Tax, which could include limiting corporate interest expense deductions and loss relief rules.
The UK Government announced a consultation in 2016 to consider a reduction in the Stamp Duty Land Tax (SDLT) return filing and payment window from 30 days to 14 days. After considering the responses to the consultation, the reduction in the filing and payment window has been put back until after April 2018.
The UK government has confirmed its intention to introduce penalties for individuals or entities that facilitate, enable and/or promote tax avoidance arrangements that fall foul of HMRC. It is envisaged that once this legislation receives Royal Assent the measure will apply to tax years beginning on or after 6 April 2017.
The UK Government intends to apply a 25% tax charge to pension transfers that are made to Qualifying Recognised Overseas Pension Schemes (QROPS). There will be exemptions to the charge where there is a genuine need to transfer the pension and the individuals concerned satisfy the exemption criteria. The measure will affect all pension transfer requests made on or after 9 March 2017. In addition, pensions that have benefitted from UK tax relief and that are transferred on or after 6 April 2017 to a QROPS will be subject to UK tax rules on payments for the first five years after transfer.
Following on from rules that came into force as of 5 July 2016 offshore property developers who are trading in or developing UK land will be taxed on profits. Initially the new rules applied only to contracts that were entered into after 5 July 2016. The government have now confirmed that this will include profits from contracts entered into before 5 July 2016 where the profit arising from the sale has not yet been recognised for accounting purposes on or before 8 March 2017. From 8 March 2017, all profits from a trade in UK land will be chargeable to UK tax regardless of when sales contracts were entered into.
All in all, the new measures in the Spring Budget may present challenges for Channel Islands residents. However, the Islands are well-served with professional advisers who will be happy to help and provide the appropriate guidance.
For further information about the UK budget and to learn how Equiom can help you, please contact Harry Lawson.