11 April 2014

Happy New Tax Year!

By Katherine Bullock

I’m sure that for many of you the 5 April and the end of 2013/14 tax year, came and went without much excitement. However, the new tax year brings with it exciting new opportunities, renewed allowances and a fresh chance to revisit your financial and tax planning.

I wanted to highlight some of these opportunities to you all so you can start to effectively plan for the new tax year.

Exemptions

The income tax personal allowance has increased to £10,000; so if you are a basic rate tax payer you will have an extra £112 in the bank.

For those of you thinking of selling any assets in the coming year, you will be pleased to hear that the capital gains tax annual exemption has also been increased to £11,000.

Remember, for married couples or civil partners, ownership of capital assets or income bearing assets may be transferred from one party to the other, at nil gain or loss, with the result that there is a better use of any unused basic/higher rate bands.

Savings

The ISA allowance has increased to £15,000, although you will need to hang fire as this increase comes into effect on 1 July 2014. You can now choose what combination of cash or stocks and shares you hold with your £15,000. George Osborne has also decided to include peer-to-peer lending within tax-free ISAs which adds an interesting new option for those of you who would like a little more risk, and potentially a little more reward, than the standard cash ISA.

Investments

There is a growing range of tax efficient investments on offer this year, with the announcement of social investment tax relief, to add into the mix of the usual EIS, SEIS, and VCT. These schemes all work in a broadly similar way, giving income tax relief on investments made in organisations which are registered under one of the schemes. You may also be able to benefit from capital gains tax relief if you roll over any gains made into your investment.

If you would like any more information regarding any of the above, or more generally your tax planning for this new tax year, please do get in touch.

Katherine Bullock:
Read profile | Contact by email | Tel: 0113 289 4268

04 April 2014

Changes to capital gains tax for non-residents

As we heard in last year’s Autumn Statement, and in March’s Budget, the Government has issued a consultation document proposing that from April 2015 capital gains tax (CGT) will be extended to non-residents who sell any UK residential property.

There are a number of issues non-residents with UK property should therefore think about. These include:

Property owned by funds

Unlike UK residents, the Government does not intend to tax non-residents on disposals of shares or units in a fund, even if the fund makes gains when selling UK residential property.

Investments in REITs

Similar to funds, non–residents holding investments in Real Estate Investment Trusts (REITs) will not be subject to the new CGT charge.

Timing of disposals

These charges will come into effect from April 2015 and will only apply to gains arising from that date. So any gains made before April 2015 will not be subject to CGT.

Annual exemption

In an attempt to mirror the treatment of UK residents, non-residents will be eligible for the annual exempt amount of £10,900.

Proposed exclusions to the rule

Some types of residential property will not be affected by the new CGT charge. These include accommodation for children, school pupils, halls of residence for students in further education, accommodation used to provide care, and accommodation for members of the armed forces and prisons.

Property ownership through partnerships and trusts

Property owned by partnerships and trusts are affected by the new charge. In the case of partnerships, gains are allocated and will be taxable on the individual partners, including non-residents. Similarly, non-residents will be taxable as trustees if gains are made on residential property held in trust.

As the proposed changes are currently going through a consultation process, the details could change between now and April 2015.

If you think you could be affected by any of the above or would like advice regarding opportunities available then you can contact Susannah Simpson who is a director in our Private Business team. You can contact her on 0131 524 2436 or by email

28 March 2014

The biggest change to pensions in over a century

By Katherine Bullock

As the dust settles on the Chancellor’s 2014 Budget, there is time to reflect on what the longer term implications might be.

For me, the Budget was one where I saw the actuaries get really excited – that little pulse in the temples is a dead giveaway. And rightly so, we are probably looking at the biggest change to pensions in over a century.

The detail is still being worked through but this video link is a helpful start. http://pwc.to/1hXAySI

And with those changes comes a complete shift in how people plan for retirement, how businesses plan their reward and an urgent revision in many entrepreneurs’ strategy for inheritance and succession planning.

Looking at the wider trends there has been a long, slow drift from an “employee” mentality to a “self-employed” mentality. People do not look to have one employer or even one career for life. Increasingly people don’t have a fixed base from which they work - more and more people challenge why they can’t work remotely, and indeed, why they can’t work anywhere in the world. Businesses and their clients work collaboratively in real time.

Now executives and entrepreneurs will need to, and will want to, take far more ownership of their reward. Offering a remuneration strategy that is a salary, bonus, benefits and a pot to one side ring fenced as pension isn’t going to easily solve the reward question going forward.

From now on, we will need to think in a different and more holistic way. Why put in place a three year, long term incentive plan for someone coming up to retirement when making a contribution to a defined contribution scheme might give a better result?

Going forward, perhaps the big underlying change from this Budget is that we are all going to manage our own finances. And this is going to be a challenge for everyone planning their retirement, even accountants.

Katherine Bullock:
Read profile | Contact by email | Tel: 0113 289 4268

24 March 2014

Changes to envelope dwellings – do you need to file a return?

October 2013 saw the first filings of returns for annual tax on enveloped dwellings [ATED ] that impacted residential properties worth more than £2m and owned by corporate structures.

The corporate, or as the legislation calls it ‘non-natural person’, has an obligation to file an ATED return for each year it holds a residential property valued at more than £2million.

Following this year's Budget on 19 March 2014, we now know that this will be extended to properties worth over £1million from April 2015 and over £500,000 from April 2016.

The legislation allowed for the ATED charge to be increased in line with inflation each year.  The charges for the 2014/15 year will therefore be:

Property value as at 5April 2013

 

ATED Charge for 2014/15

 

More than £2million but not more than £5million

£15,400

 

More than £5million but not more than £10million

£35,900

 

More than £10million but not more than £20million

£71,850

Over £20million

£143,750

 

But it is important to remember that while transitional provisions were in place for the first year, for the coming tax year, the ATED tax returns must be filed by 30 April 2014 and payment made by the same date.

And even where a company qualifies for an exemption from the charge, for instance because the property is let to a 3rd party on a commercial basis, a return is still due to be filed and late penalties are automatically imposed if the deadline is missed.

HMRC has yet to follow up on the returns they received last October and we are still making late returns on behalf of corporate structures.  It is understood that HMRC will be reviewing the Land Registry records to identify any other high value resident properties they believe are owned by corporate structures and contacting them over the coming months.

If you have any queries, please contact Alison Hill on 0207 804 4983 or Penny Lupton on 0191 269 4098.

19 March 2014

Budget 2014: property taxes

Katherine Bullock

The Government has announced  the extension of the mansion tax to homes over £500,000 bought through a corporate envelope.

The Chancellor is now using last year's punitive stamp tax on homes bought in 'wrappers' to deter overseas investors who "buy to leave" and are not investing.

This creates an onerous burden and could have unintended consequences, for example buy to let landlords, funds and housing associations will be exempt from the tax but will still have to complete a tax return, resulting in an extra compliance cost. What's more, because the changes are introduced at different times any owner is going to struggle with getting the tax right.

Clearly this regime, which was aimed at collecting taxes, is now seeking to change behaviour. The problem is that now the Treasury can collect mansion tax it could be easily extended to owner-occupied property and this would hit ordinary homeowners hard.

Katherine Bullock:
Read profile | Contact by email | Tel: 0113 289 4268

A summary of the main changes announced:

SDLT 15% - from 20 March 2014

ATED - annual charge new bands - staged -  over £500k to £1m  - £3,500 pa from 1 April 2016  and £1m to under £2m - £7, 000 pa from 1 April 2015

CGT at  28% on sale  - gains over £1m from 6 April 2015 on gains that accrue after that date;  and for houses between £0.5m and £1m the CGT applies from 6 April 2016 for gains that accrue after that date

From the Budget 2014 documents:

Changes to the taxation of high value UK residential property held by certain non-natural persons

Who is likely to be affected?

Companies, partnerships with company members and collective investment schemes (collectively referred to as non-natural persons (NNPs)) which purchase, own or dispose of residential property in the UK worth over £500,000 and up to £2 million.

General description of the measure

An extension to the package of taxes that affect residential properties held by NNPs, other than genuine commercial businesses and other limited categories, to properties worth more than £500,000 up to £2 million.

These taxes are:
• stamp duty land tax (SDLT) at 15 per cent on acquisition of a residential property;
• an annual tax on enveloped dwellings (ATED); and
• capital gains tax (CGT) at 28 per cent on any gain on disposal.

Policy objective

This measure is to tackle tax avoidance and to ensure that those wrapping residential property in corporate and other ‘envelopes’ and not using them for a commercial purpose, such as renting them out, pay a fair share of tax.

Background to the measure

This measure was announced in Budget 2014. The Government will consult on possible options to simplify the administration of ATED, in particular for property businesses eligible for reliefs.

13 March 2014

EU anti-money laundering changes

By Katherine Bullock

On 27 February 2014, EU anti-money laundering changes were voted on in the European Parliament, which could have implications for trusts. At this stage it must be remembered that this is proposed legislation and has to pass further legislative stages before it comes into force.

But the MEP vote could mean that the beneficiaries of trusts in EEA countries will have to list their interest in public registers. These draft anti-money laundering rules were approved by the Economic Affairs and the Justice and Home Affairs Committees.

This is part of a series of measures aimed at preventing fraud and creating greater transparency. UK trust structures have been used routinely for hundreds of years to organise family property and hold assets jointly so these changes could have a wide impact in the UK.

At the moment it is unclear what detail will need to be disclosed and some modifications to protect privacy have already been suggested. This includes the register identifying the beneficiaries of a trust but not revealing details of what is in the trust or what it is for.

The EU Presidency is in dialogue with the EU Parliament, Commission and Committee and will now decide the final detail of the legislation, which will inevitably result in some compromise and which we may be available in the final quarter of 2014.

The UK Government will then have a maximum of two years to bring this legislation into force. The scope of these rules and the level of public availability of the resulting information will depend on the final stages of the EU procedure and the UK legislation, so it is very much a case of needing to keep this area under review.

Katherine Bullock:
Read profile | Contact by email | Tel: 0113 289 4268

11 March 2014

PwC’s Women in Work survey: UK ranks 18 out of 27

By Katherine Bullock

The annual PwC Women in Work Index was launched last week [6 March] which shows that the UK ranks 18 out of 27 OECD countries. This is based on a combination of five key indicators:

  • Equality of earnings with men;
  • Proportion of women in work in absolute terms;
  • Proportion of women in work relative to men;
  • Female unemployment rate;
  • And the proportion of women in full time employment.

The UK has made progress; we’ve moved up one place to 18th position. But the UK still lags behind many OECD countries when it comes to overall female economic empowerment. And it is important to remember that the UK was at 14th when the survey began in 2000.

The Nordic countries continue to lead.  Norway, Sweden and Denmark have consistently occupied the top three positions in the Index for the last 14 years. While the prize for most dramatic improvement goes to Ireland with their wage gap narrowing from 20% in 2000 to 4% in the current survey.

Interestingly, while organisations talk about diversity, over half of the millennial generation (born between 1980 and 1995) do not feel that work opportunities are really equal for all.

Our report Next generation diversity – Developing tomorrow’s female leaders, which is based on a survey of over 40,000 global workers born between 1980 and 1995, reveals that nearly a third think that employers are too biased towards male employees when it comes to promotion.

But despite a significant number of female millennials experiencing unfairness in the workplace, the majority are confident about their own career progression, with promotion opportunities rated as the most attractive employer trait.

The perception of gender bias in organisations is key given that this generation of female workers is set to make up 25% of the global workforce by 2020.

Anecdotal evidence suggests that more and more women are setting up their own businesses to create their own workplace environment. And with people becoming ever more global, it isn't hard to see moves to other countries where there may be more equality in the work place becoming more common. Definitely a trend to watch!

Katherine Bullock:
Read profile | Contact by email | Tel: 0113 289 4268

07 March 2014

End of year tax planning: it’s not too late

With the 2014 tax year-end date of April 5 fast approaching, now is the time to plan effectively and consider the allowances and reliefs to which you are entitled in computing your 2013/14 income tax liability. Here are some things you may want to think about:

Personal tax allowances

There are a number of things that affect the tax position of married couples and civil partners. In this position you should think about the extent to which you own (or are prepared to transfer to your partner):

  • income bearing assets, if your partner is taxed at a lower income tax rate than you are; and
  • capital assets, if your capital gains have exceeded or would exceed your annual capital gains tax exemptions but all or part of your partner's exemption would be unused (£10,900 per annum).

Savings

Can you make use of the annual ISA allowance which enables tax exempt savings of £11,520 in 2013/14? Up to £5,760 can be saved in a cash ISA, while the remainder can be invested in a stocks and shares ISA, both of which are exempt from tax.

Tax efficient investments

Income tax relief is available at 30% on qualifying investments in enterprise investment scheme (EIS) companies (up to £1 million) and venture capital trusts (VCTs) (up to £200k).

Pension contributions

Tax relief for pension contributions up to £50k per year is provided at your marginal rate of income tax. If you want to consider greater pension provision, you can also increase this to a maximum contribution of £200k by using any carried forward relief you have from the previous three years.

The annual allowance will reduce to £40k from 2014/15 onwards so you should consider whether you want the tax benefit you'd receive from additional pension contributions now.

Charitable giving

If you want to give to charity, gift aid donations benefit from tax relief, with higher rate and additional rate tax payers benefitting from additional relief of 20% and 25%.

If you would like to find out more about any of the above please contact Susannah Simpson, Director in our Private Business team. You can contact her on 0131 524 2436 or by email: susannah.m.simpson@uk.pwc.com

05 March 2014

More buoyant housing market could lead to tax on main homes from 6 April

From 6 April 2014, homeowners could be hit by an unexpected capital gains tax bill on the sale of their main home, as changes to legislation come into force.

Previously, a house that has been occupied as your main home is exempt from UK capital gains tax on any increase in value. This relief is known as principal private residence relief (PPR). But if there is a period in which you don’t live there, capital gains tax may be charged when it is sold.

PPR has historically been automatically available for the last three years of ownership, whether you live there or not.  However from 6 April this year, this relief will be significantly reduced to only the last 18 months of ownership.

With a stagnant UK property market over the last few years, many people have delayed selling their old home.  Instead moving into their new home and retaining the old one in the hope of more favourable market conditions.  But with house prices picking up, sellers may now find that when they face an unexpected tax bill when they sell their old property for more than they expected.

Married couples that have recently moved in together and delayed selling a second home will also be affected as only one property can be classed as a PPR.   If the happy couple own more than one property, then an election as to which is the main residence must be made.  In these circumstances it’s possible that PPR may not exempt all of the capital gains, with the result that tax is due when the property is eventually sold.

If you have a property, you no longer occupy and that you are looking to sell, it may well be worth keeping an eye on the number of months since you moved out and if necessary setting your estate agent the target of delivering a sale before the start of the next tax year.

Katherine Bullock:
Read profile | Contact by email | Tel: 0113 289 4268

28 February 2014

PwC Private Client Team shortlisted for Family Wealth Report Awards 2014

By Katherine Bullock

We are extremely excited and delighted to have been shortlisted for the prestigious Wealthbriefing European Awards 2014.

These awards showcase “best of breed” providers in the global private banking, wealth management and trusted adviser communities and are designed to recognise teams who have demonstrated innovation and excellence during the year.  They recognise the very best operators in the private client industry and are judged on independence, integrity and genuine insight.

The awards focus on client experience rather than quantitative performance metrics, so it’s a great honour and testament to the hard work the team has put in over the last 12 months to have reached this stage.

The winners are announced at a gala awards dinner at the Guildhall in the City of London on 15 May 2014 and we are all really looking forward to being there.

Katherine Bullock:
Read profile | Contact by email | Tel: 0113 289 4268