The Budget that wasn't
As is often the case with a Budget delivered immediately prior to a General Election, today's announcements by the UK Chancellor of the Exchequer were more about securing headlines and votes than introducing significant changes to the tax system. In reality, this year's real Budget will come just after the election in May.
However, there were a number of announcements that will be of interest to readers of our Swiss news letters and these are set out below.
Disclosure facilities and anti-avoidance
Perhaps the most significant of today's announcements is the news that the Liechtenstein and the Crown Dependencies (Jersey, Guernsey and Isle of Man) disclosure facilities will terminate early. It was confirmed today that these facilities will close in December 2015 and will be replaced by a tougher new facility. This new facility will run from 2016 to mid-2017, will feature a harsher penalty regime and will offer no guaranteed immunity from criminal prosecution.
Anyone wishing to take advantage of the attractive terms offered by the Liechtenstein and Crown Dependencies disclosure facilities before they are closed is advised to contact us without delay.
Commitment to the common reporting standard (‘CRS')_
The importance of the need to ensure that individuals are fully tax compliant (and the fact that there is no place to hide if they are not) was underlined by the Government's announcement of its commitment to introduce regulations relating to the implementation of the CRS. Under these regulations, financial institutions will be required to collect data on individuals who have accounts in the UK but are not resident there and send it to the tax authorities of the country in which the individual is resident. Similar regulations are being introduced by governments around the world which are designed to report information on bank accounts held outside the UK by UK residents.
General Anti Abuse Rule (‘GAAR') penalties to be introduced_
The GAAR was introduced in 2013 with the intention of discouraging tax planning which seeks to exploit unintended loopholes in the UK tax legislation. As part of its strategy to enhance the deterrent effect, the government announced that legislation will be introduced in a future Finance Bill that introduces a specific, tax-geared penalty that applies to cases caught by the GAAR.
Capital gains tax
Non-residents and capital gains tax on residential property
The Government has confirmed that Finance Bill 2015 will contain provisions which will mean that, from 6 April 2015, non-UK resident individuals, trusts and privately owned companies will be subject to capital gains tax on gains accruing on the sale of UK residential property on or after that date. The tax payable will be limited to any post-5 April 2015 element of the gain arising.
On a related matter, the Government confirmed that it is to go ahead with its plan to alter the application of the principal private residence relief for non-UK residents. Under the new rules, the principal private residence relief (which can potentially reduce the capital gains tax payable on the disposal of a residential property which has been an individual's principal or main residence during the period of ownership to nil) will only be available on a disposal of UK residential property by a non-UK resident if a new occupancy test is met. The test requires the individual (in combination with his spouse or civil partner) to spend at least 90 nights in the property in any tax year in which the relief is claimed.
Deeds of Variation
Deeds of Variation have long been used as a way of changing arrangements made by a deceased individual in his will in order to take account of changes in family circumstances since the preparation of the Will or to take advantage of tax benefits which may not have been utilised on death. In his Budget speech, the Chancellor announced a review of the use of Deeds of Variation as part of the Government's wider clamp-down on tax avoidance strategies.
The end of tax returns?
One of the announcements attracting the most attention today was the news that the Government intends to introduce 'digital tax accounts' from 2016.
These digital accounts will replace the annual tax return and will take data already available to HMRC (such as information relating to UK employment income provided through the PAYE system) and combine it with information from other third parties, such as banks, pension providers and investment funds to automatically prepare an online account, which can be used to calculate the amount of tax payable. This models a system already in place in Denmark.
The information released today states that taxpayers will be able to 'register, file, pay … at any time of the year' and the introduction of this system may well see the end of the traditional 31 January rush to complete a tax return. A 'pay as you go' system should also allow taxpayers to spread tax payments over time.
Other points to note
Increased remittance basis charge
The Government confirmed that it is to go ahead with the introduction of a £90,000 remittance basis charge for non-domiciliaries who have been resident in the UK in at least 17 of the last 20 years. It was also confirmed that the charge for those claiming the remittance basis having been resident for 12 out of the last 14 tax years will be increased from £50,000 to £60,000 per year.
The government is still consulting on whether to make any decision to pay the remittance basis charge apply for a minimum of three years.
Deduction of tax at source
From April 2016 banks will no longer be obliged to deduct tax at source on interest arising on UK bank accounts. This will be of interest to non-UK resident individuals since they will no longer have to specifically request their UK bank not to deduct this withholding tax.