One minute with Sue Laing, partner at Boodle Hatfield.
We’ve had changes to the taxation of non-doms in successive Finance Bills. Is that now the end of the story?
I am afraid not! Since the announcement in 2015 of initial proposals to time limit the availability of the remittance basis and remove the IHT benefits of owning UK homes through offshore structures, it has taken over two years for the bulk of the legislation to be enacted. There remain areas where it is unclear what the precise practical effects will be and we are awaiting guidance. Meanwhile, additional substantive legislation on offshore trusts and anti-avoidance, to take effect from this April, is still going through Parliament.
More generally, the UK tax treatment of internationally mobile taxpayers continues to be a hot topic both politically and in the media. Changes to the taxation of international HNWIs (both non-doms and non-UK residents) have been made each year since at least 2008 and this trend shows no real sign of abating: for example, we already know that disposals of all UK property by non-residents will be within the scope of CGT by April 2019. I would hope that the pace will at least slow down, to provide a period of stability, allow all of the new laws to bed in properly and avoid deterring the internationally wealthy from coming to and investing in the UK.
Are there any new rules that are causing a particular problem?
The new requirement for trusts to register with HMRC, providing detailed information about those trusts and their beneficial owners, is proving challenging. That is because of the tight timescale within which the UK implemented this EU directive, a lack of clarity as to exactly what information is required, and technical problems with HMRC’s online system. Whilst the drive towards global transparency and a more open approach is to be welcomed, subject to appropriate consideration of privacy rights, private client practitioners have had to get to grips with a lot of compliance measures (FATCA, the common reporting standard, several changes to the anti-money laundering regulations and the various beneficial ownership registers). In practice, those regulations can prove difficult and time consuming to apply.
What should we be looking out for in 2018?
On the offshore front, we expect rules to prevent the washing out of trust gains by payments to non-UK residents, as well as tighter rules regarding remittances and the routing of payments from offshore trusts to the UK via non-UK residents. It also seems likely that plans for a register of beneficial owners of offshore companies that own UK property will be taken forward later this year, whilst various EU/OECD led initiatives are being developed that will ultimately require further reporting of offshore trusts.
Closer to home, a government consultation on how to make the taxation of trusts ‘simpler, fairer and more transparent’ was announced in the Autumn Budget. We don’t yet know what exactly its focus will be, although hopefully it will includes practical issues such as: simplifying the tax calculation and reporting of ten yearly charges; the operation of section 81 (property moving between settlements) and reducing its complexity; and reviewing the rationale for 18-25 trusts. The continued drive to make tax digital may also become more apparent, at least towards the end of the year, as will the looming impact of Brexit and its effect on tax laws, reliefs and strategy.
Last, but not least, the new DOTAS regulations for IHT will add a further layer of compliance to IHT planning post 1 April 2018. It is not yet clear what contrived or abnormal steps will make an IHT planning arrangement reportable and so we hope for meaningful and detailed guidance on this soon.
Do you have a favourite quote or mantra?
Keep your sense of humour – you are neither that important nor indispensable!
One minute with Sue Laing, partner at Boodle Hatfield.
We’ve had changes to the taxation of non-doms in successive Finance Bills. Is that now the end of the story?
I am afraid not! Since the announcement in 2015 of initial proposals to time limit the availability of the remittance basis and remove the IHT benefits of owning UK homes through offshore structures, it has taken over two years for the bulk of the legislation to be enacted. There remain areas where it is unclear what the precise practical effects will be and we are awaiting guidance. Meanwhile, additional substantive legislation on offshore trusts and anti-avoidance, to take effect from this April, is still going through Parliament.
More generally, the UK tax treatment of internationally mobile taxpayers continues to be a hot topic both politically and in the media. Changes to the taxation of international HNWIs (both non-doms and non-UK residents) have been made each year since at least 2008 and this trend shows no real sign of abating: for example, we already know that disposals of all UK property by non-residents will be within the scope of CGT by April 2019. I would hope that the pace will at least slow down, to provide a period of stability, allow all of the new laws to bed in properly and avoid deterring the internationally wealthy from coming to and investing in the UK.
Are there any new rules that are causing a particular problem?
The new requirement for trusts to register with HMRC, providing detailed information about those trusts and their beneficial owners, is proving challenging. That is because of the tight timescale within which the UK implemented this EU directive, a lack of clarity as to exactly what information is required, and technical problems with HMRC’s online system. Whilst the drive towards global transparency and a more open approach is to be welcomed, subject to appropriate consideration of privacy rights, private client practitioners have had to get to grips with a lot of compliance measures (FATCA, the common reporting standard, several changes to the anti-money laundering regulations and the various beneficial ownership registers). In practice, those regulations can prove difficult and time consuming to apply.
What should we be looking out for in 2018?
On the offshore front, we expect rules to prevent the washing out of trust gains by payments to non-UK residents, as well as tighter rules regarding remittances and the routing of payments from offshore trusts to the UK via non-UK residents. It also seems likely that plans for a register of beneficial owners of offshore companies that own UK property will be taken forward later this year, whilst various EU/OECD led initiatives are being developed that will ultimately require further reporting of offshore trusts.
Closer to home, a government consultation on how to make the taxation of trusts ‘simpler, fairer and more transparent’ was announced in the Autumn Budget. We don’t yet know what exactly its focus will be, although hopefully it will includes practical issues such as: simplifying the tax calculation and reporting of ten yearly charges; the operation of section 81 (property moving between settlements) and reducing its complexity; and reviewing the rationale for 18-25 trusts. The continued drive to make tax digital may also become more apparent, at least towards the end of the year, as will the looming impact of Brexit and its effect on tax laws, reliefs and strategy.
Last, but not least, the new DOTAS regulations for IHT will add a further layer of compliance to IHT planning post 1 April 2018. It is not yet clear what contrived or abnormal steps will make an IHT planning arrangement reportable and so we hope for meaningful and detailed guidance on this soon.
Do you have a favourite quote or mantra?
Keep your sense of humour – you are neither that important nor indispensable!
