After defeats over the Brexit bill timetable and request for a general election for UK prime minister Boris Johnson, the government has cancelled the budget which was scheduled for 6 November 2019.
Neil Jones, tax and wealth specialist at Canada Life, said: “Brexit is sucking the air out of a lot of other debates that we should be having around finances.
“That’s unfortunate, as there are a few key issues that the next budget should be looking at.”
Things are up in the air now that a general election is on the horizon, which could mean a potential Labour/Liberal democrats coalition.
International Adviser asked several financial services and law firms what tax changes they would like to see in regard to high net worth/private clients.
Inheritance tax
Christopher Groves, partner in the private client and tax team at Withers, said: “The headline proposal [from the Conservative Government] is to scrap IHT which, despite being a highly political subject, pulls in relatively little tax revenue.”
But while Rachael Griffin, tax expert at financial services firm Quilter, acknowledges it “would be a clear crowd pleaser”, she thinks “a complete eradication is unlikely at this point in time”.
“The tax brings in £5.4bn ($6.91bn, €6.24bn) per year to the government and with finances looking tight that’s a big chunk of change to do without – particularly when other giveaways are on the cards,” she continued.
“The Office for Tax Simplification was recently tasked with just that and in two reports they outlined some of the arcane intricacies that lurk in the system and offer a number of options for reform.
“Among other things, the paper recommends updating the gifting allowance to align it to inflation; removing capital gains tax uplift on death; extending spousal tax rules to cohabiting partners; and calls for a simplification of the residence nil-rate band.
“These are some further sensible measures which could resolve some simple flaws.”
Complicated
Tim Snaith, partner in the private client and estates team at law firm Winckworth Sherwood, said: “The laws surrounding inheritance tax should be simplified. I believe it is unlikely that we will ever be able to avoid some form of tax arising on death but the current system is complex, arbitrary in places and baffling to many.
“As a starting point, I would like to see the residence nil-rate band removed and replaced by an increase in the current nil-rate band amount.
“As it stands, the residence nil-rate band is far too complicated for the lay person to understand and only benefits those families that have children and a property to pass on.”
Hugo Jenney, tax partner at law firm Stephenson Harwood, said: “I would also abolish the inheritance tax charge on properties owned, directly and indirectly, by non-resident foreign domiciled individuals and maybe accompany that with abolition of base cost uplift on death for such properties.
“This would permit investment without the risk of eye-watering random inheritance tax charges, whilst leaving gains within the scope of tax.”
Trusts
Canada Life’s Jones said: “It’s important to simplify the reporting requirements under trusts. These are onerous and HMRC is aware as they conducted a consultation on the taxation of trusts and the reporting that is required.
“At the moment, in some instances people have to file returns even if there is no inheritance tax to pay, which is work for no reward and trustees are bound by a web of tax rules which can be complicated and increase costs which trustees have to bear.”
Pensions
Jones added: “Pensions are an area that the government likes to tinker with each year and find difficult to leave alone.
“We’ve had years of rumours on proposed tax relief changes for pension contributions with the suggestion of having a flat rate of tax relief.
“That would be a straightforward solution – however, as is the way with rumours, these come around every budget and still nothing happens, and this year is nothing different.”
David White, managing director at QB Partners, said: “It would be good to see confirmation that the 25% pension commencement lump sum (PCLS) will remain tax free for UK pensions.
“There has been some press about this becoming taxable and suspicion has been there ever since HM Revenue & Customs replaced tax free cash with PCLS.
“Experts are seeking clarification as to the treatment of the Overseas Transfer Charge for UK residents, as and when or if the UK leaves the EEA. As it stands an Overseas Transfer Charge of 25% would be applied as the EEA exemption (client lives in the EEA and transfers to an EEA Qrops) would no longer apply.”
David Hearne, director of Satis Wealth Management, said: “We would like to see government simplify the rules on pensions, in particular by removing the lifetime allowance and tapered annual allowance.
“This would make it easier to people to plan for their retirement, and not penalise people for starting young or making good investments.”
Property
Zena Hanks, partner at Saffery Champness, said: “We also need to consider how we can unlock the stagnant property market. Perhaps this could be through a more favourable rate of capital gains tax offered to landlords selling their rental property to the tenant.
“At the same time, the significant tax changes on the horizon for owners of multiple properties pose real challenges. There are always knock on effects and government will need to be mindful that policies which seek to crack down on multiple home ownership do not stymie access to good rental properties for those individuals who are trying, or are unable, to save money for a deposit.
“Renting is still an important part of the housing mix and this government, in particular, has been decidedly lukewarm in its attitude towards landlords. Clarity and consistency is needed and tax policy should support a broad range of property products and aspirations.”
Stamp duty
Stephenson Harwood’s Jenney added: “I would reduce the rates of stamp duty land tax on residential property and re-think council tax so that it funds not just the local area but neighbouring areas, recognising that affluent areas rely on people and businesses in other areas.
“I think that current rates of stamp duty land tax are an excessive restriction on our freedom to move to work and live elsewhere. For investment properties I can see the case for taxing the privilege of owning a property in an international city such as London but the tax should be more locally based.
James Quarmby, tax partner at the same law firm, said: “The high rates of stamp duty land tax are counterproductive, they need to be reduced to a top rate of max 7% – this will stimulate the market and, ironically, probably improve tax receipts.
“The ‘temporary’ top rate of income tax of 45% has been around for too long – it needs to be reduced to 40% as a demonstration that the UK is open for business and enterprise. Likewise, the 2% high earners surcharge for National Insurance Contributions should be abolished.
“I would reduce all employers’ NIC down to a flat 10% rate as employers’ NIC is simply a tax on jobs.”
Consistency
Saffery Champness’ Hanks added: “Moving forward, we need to iron out the wrinkles where there is unfairness in the tax system, particularly for earners who have been sucked into the higher tax bands thanks to fiscal drag, and as so, shoulder a significant economic burden.
“Many of these individuals are missing out on the recent changes to the personal allowance which have mainly benefited lower and middle-income households.
“At the same time, where an individual receives child benefit, but a member of the household has income that exceeds £50,000, the child benefit begins to be clawed back. These peculiarities can feel unfair to the taxpayer, who craves fairness and clarity above all.
“It would also be good to see some accountability by HMRC following the House of Lords committee notes published back in December 2018, which called into question the greater power given to HMRC to tackle tax evasion.
“The majority of taxpayers just want to get their tax right so let’s ensure a fair balance between HMRC and the taxpayer.”
