This is because there are a number of changes that will affect such individuals – and in certain cases, oblige them to consider making changes to their existing wealth structuring arrangements, or to do things differently going forward – in the wake of Government moves to make legal tax avoidance more difficult for Britain’s most affluent taxpayers.
For example, a new 15% charge is being implemented on the use of foreign companies to purchase UK residential properties worth more than £2m, a time-honoured way many have used to legally avoid UK stamp duty.
Indeed, the general theme of the Chancellor’s Budget, as it applied to wealthy taxpayers, seemed to be a give-back with one hand, of 5% off the top rate of income tax (to 45% from 50%) paid by those earning £150,000 annually or more – while at the same time, taking away with the other hand some of the most popular legal loopholes for tax avoidance.
Below are some of the key points of today’s Budget, as highlighted by International Adviser’s panel of tax experts.
More detail on some of the most important ones, along with analysis, will appear here tomorrow and over the next days.
- The use of certain types of life insurance bond structures to avoid or defer tax on “chargeable events” is being stopped
- An end has been put as well to the use of certain ‘cluster policy‘ arrangements in life insurance products, to defer any income tax until the final policy in the cluster has expired; such arrangements will now be treated as a single policy for the purpose of the chargeable event regime
- Existing age-related allowances will be frozen from 6 April 2013 at their 2012–13 levels (£10,500 for those born between 6 April 1938 and 5 April 1948, and £10,660 for those born before 6 April 1938), until they align with the personal allowance; and from April 2013, age-related allowances will no longer be available, except to those born on or before 5 April 1948
- A higher annual charge of £50,000 for those non-domiciled individuals resident in the UK for at least 12 of the previous 14 years, who claim the remittance basis in lieu of a tax on their income, will go ahead from April as originally planned, in spite of calls by some to keep it at £30,000. The £30,000 charge remains in place for those with fewer than 12 years UK residence
- A plan to increase the IHT-exempt amount that a UK-domiciled individual may transfer to his or her non-UK-domiciled spouse or civil partner is also planned, to take effect in 2013
- Individuals who are domiciled outside the UK, and who have a UK-domiciled spouse or civil partner, are to be permitted to elect to be treated as domiciled in the UK for the purposes of IHT, under legislation that is to be included in next year’s Finance Bill
- Corporation tax will be reduced by an extra 1% on top of previously announced reductions – to 24% from 26% – in April, and fall to 22% in 2014
- A general-anti-avoidance rule (GAAR) is to be introduced, to take effect in 2013; details have yet to be revealed, but it would target contrived tax avoidance schemes, tax experts say
- Rules affecting excluded property and settled property trusts are being changed to curtail the use of such schemes by UK-domiciled individuals for inheritance tax avoidance purposes; it will affect new schemes entered into on or after today
