UK Summer Budget 2015: Comment from the wealth industry
George Osborne, the UK's Chancellor of the Exchequer, released details of the 2015 budget on 8 July.
This comes after the UK Conservative party win in the general election on 7 May, marking the first all-Conservative budget since 1996.
The budget will have implications for the wealth sector in the UK, with an increase to the inheritance tax threshold to include properties of £1m and more stringent regulation on tax evasion, including cutting the remaining time available for disclosure using the Liechtenstein Disclosure Facility (LDF).
The budget will also abolish the status of non-domiciles who were born in the UK, as well as individuals who have resided in the UK for 15 of the last 20 years.
Industry experts comment on the summer budget’s implications for high net worth individuals (HNWIs) at first glance:
Tessa Lorimer, special council at Withers’ tax investigation team:
“Chancellor George Osborne revealed that the remaining time spans for the Liechtenstein Disclosure Facility (LDF) and the Crown Dependency Disclosure Facilities (CDDF) were to be severely foreshortened, and that both would close at the end of 2015. This cuts four months off the original term of the LDF, and a full nine months from the CDDF’s proposed span.
These facilities, it was revealed, are to be replaced by a new disclosure facility which comes into effect from 1 January 2016. This facility is expected to run for around eighteen months, up until the introduction of the Common Reporting Standards (CRS) which will come online from 2017, and will offer ‘less generous terms’ than the LDF and CDDF.
I expect that this ‘Emergency Budget’ will contain much more detail on the terms of the new disclosure facility. All we have had to date is that the facility will be tougher than previous ones, with a penalty rate of ‘at least’ 30 per cent on assets disclosed, and no guarantee that disclosure will protect one from criminal investigation.
Compare this with standard fixed penalties of 10% and the non-prosecution guarantee under the LDF, and a certain nostalgia for these more lenient facilities is understandable.”
David Bell, Senior wealth planner at Lombard Odier:
“Abolishing the permanent ‘non-dom’ status will make the UK a less attractive destination for wealthy individuals, particularly in a competitive market where countries are looking to attract such tax payers.
“The same is true of the decision to remove the inherited ‘non-dom’ status from people born in the UK to parents domiciled here. Switzerland, Monaco and other countries could benefit from making UK resident non-domiciled individuals feel less welcome.”
Rachel de Souza, Tax Director, RBC Wealth Management
“The Chancellor’s message to the nation is “don’t die yet”, with the promised increase in IHT relief on the family home due to kick in by 2017.
The Conservatives pledged to remove the family home from IHT and the Chancellor has confirmed a new relief will be available from 6 April, 2017. As long as the deceased died owning his or her main residence an additional IHT allowance of £175,000 per person will be available and transferable between spouses. In total, therefore, the additional IHT saving will be as much as £140,000.
As always there is a catch; the new relief tapers away for estates worth more than £2m, so this new relief is finely targeted at middle income earners living in the South East.
Although the headline of £1m IHT exemption for the family home is true, it is not the whole story. The £1m is made up of the full existing IHT exemption of two spouses, plus the new relief. A couple with a £1m house and £200k in investments will save £140k in tax, but will still pay IHT of £80k. While the relief is welcome, it is not as generous as the headlines imply.”
Tina Riches, national tax partner, at Smith & Williamson
On buy to let properties, the Chancellor’s announcement that the tax relief on mortgage interest would be reduced over a period of four years to the basic rate came as no surprise, given the recent campaign to level the property playing field.
“This, coupled with the rest of the basket of property tax measures, will tip the balance away from buy to let. Phasing in changes over several years will help owners adjust to the new environment, which includes abolition of the arbitrary yet simple 10% ‘wear and tear allowance’, yet allowing costs incurred, which may be very welcome.