A few announcements in the UK Autumn Statement may affect expatriates, depending on your circumstances.
Where necessary you should seek professional advice to establish how the changes impact you and if you need to take action.
Capital gains tax on property
Non-UK residents, including British expatriates, will be liable to capital gains tax on gains arising on disposals of UK residential property from April 2015.
The accompanying documentation, and Mr Osborne himself, refers to “future gains”, which indicates that only gains arising from that date will be subject to tax. However it is not immediately clear whether this will be the case, or if the full gain since acquisition will be taxed. We need to await full details on exactly how this will operate. British residents currently pay up to 28% tax on gains above £10,900, depending on income. A consultation regarding these changes will begin in early 2014.
The government is also proposing to introduce changes to the rules relating to the capital gains tax exemption (the Principle Private Residence exemption) for the main home. Currently if the property has been used as a main home, the last 36 months of ownership can be treated as a period of deemed occupation and benefit from the exemption even if the person moves into a new main home. This 36 months period will reduce to 18 months from 6th April 2014.
There is an opportunity to review your assets and their tax efficiency while there is still time to effect changes. You need to take your overall circumstances, and both the UK and your local tax legislation, into account. Seek specialist advice.
Inheritance tax and trusts
Legislation will be enacted as part of Budget 2014 to simplify filing and payment dates for inheritance tax relevant property trust charges. Legislation will also be introduced to treat income arising in such trusts which remains undistributed for more than five years as part of the trust capital when calculating the 10-year anniversary charge.
The government will consult on proposals to split the inheritance tax nil rate band available to trusts, with a view to delivering this change alongside simplification of the trust calculations in 2015.
With immediate effect, the capital gains tax “uplift” provisions applying on the death of a vulnerable beneficiary will be extended. The range of trusts that qualify for special income tax, capital gains tax and inheritance tax treatment will be extended from 2014-15.
Tax evasion and avoidance
The government announced several measures to tackle what it believes to be tax avoidance strategies.
With regards tax evasion, since the March Budget the government has signed automatic tax information exchange agreements with the Isle of Man, Guernsey, Jersey, Cayman Islands, Gibraltar, Bermuda, Montserrat, Turks and Caicos Islands and British Virgin Islands.
In early 2014 HM Revenue & Customs will launch a project to ensure it is ready to exploit the data available under these agreements. It will consult on a range of enhanced proposals to penalise those who hide their money offshore. This initiative underlines the commitment to pursue offshore evaders and deter would-be evaders.
As announced at Budget 2013, people born after 5th April 1948 will be entitled to a basic personal allowance of £10,000 for the 2014/15 tax year. The basic rate band will apply to income between £10,001 and £41,865. The rate of tax will be announced in the March Budget.
From April 2015, a married person (or civil partner) who does not use their personal allowance, or whose income is at the £10,000 limit, may transfer £1,000 to their partner.
From October 2015 a new class of voluntary National Insurance Contributions (Class 3A) will be introduced that gives those who reach state Pension age before 6th April 2016 an opportunity to boost their Additional State Pension.
Plans to increase the state pension age are being accelerated. It will rise to 68 in the 2030s and to 69 in the 2040s.
The changes reflect increasing life expectancy. This is a concern of governments everywhere as it will put increased pressure on State coffers. Governments may have to increase tax revenue in future to help fund their pension and social care budgets.
The Office for Budget Responsibility now expects growth of 1.4% this year and 2.4% in 2014, double its earlier predictions. The Chancellor remains committed to austerity, warning that more work needs to be done to improve the deficit and economic recovery.
If any of these changes may affect you, seek specialist advice relating to your personal circumstances. Remember you need to take the tax rules of both the UK and your country of residence into account to determine the best solution for you.
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.
Written by Gavin Scott, Senior Partner, Blevins Franks