FOLLOWING the changes announced in respect of entrepreneurs’ relief in the Autumn Statement and Spring Budget, it was perhaps not surprising that the Chancellor decided not to tinker too much more with Capital Gains Tax (CGT).
However, there were some announcements that will have significant CGT implications for some.
FOLLOWING the changes announced in respect of entrepreneurs’ relief in the Autumn Statement and Spring Budget, it was perhaps not surprising that the Chancellor decided not to tinker too much more with Capital Gains Tax (CGT).
However, there were some announcements that will have significant CGT implications for some. The announcement that non-domiciled individuals will automatically be treated as UK domiciled from April 2017 will result in CGT implications (as well as income tax and IHT implications) for those individuals.
As it stands, non-domiciled individuals who have been UK resident for fewer than seven of the last nine years are only taxed in the UK on worldwide gains to the extent the gains are brought into the UK (the remittance basis). Individuals who have been UK resident for at least seven of the previous nine tax years must pay an annual charge of £30,000 to access the remittance basis, otherwise they are taxed on their worldwide gains. This charge increases to £60,000 for those who have been UK resident for 12 of the last 14 years and to £90,000 for those who have been UK resident for 17 of the last 20 years.
The changes mean that from April 2017 an individual who has been UK resident for 15 of the last 20 years will be automatically treated as domiciled in the UK and will, therefore, be subject to UK tax on worldwide income and gains. The £90,000 charge will be dispensed with but the charges for those who have been resident for seven of the last nine years and 12 of the last 14 years will continue to apply. There is also a further rule that applies to individuals who have a UK domicile at birth but later emigrate and acquire a foreign domicile. Broadly, these individuals will revert to a UK domicile for tax purposes if and when they return to the UK.
On a more general point, the announcements regarding the increase to dividend tax rates will impact on tax planning strategies.
These changes could act as an incentive for owner managers to retain profits in the company and later extract them as a capital distribution liable to CGT as part of liquidation or other exit strategy such as a share buyback. Given the new dividend rates this type of strategy could provide significant tax savings especially where entrepreneurs’ relief is available to limit the CGT rate to 10 per cent.
For more information regarding Capital Gains Tax contact Aaron Hemmington at Hawsons Chartered Accountants on 01604 645600, email or visit www.hawsons.co.uk