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An eventful Autumn Statement the changes. T
One of the key changes is to the way stamp duty (SDLT) is charged on all residential property transactions effective on or after 4th December 2014. Non-residential, mixed property and ‘enveloped dwellings’ are unaffected.
Under the current system for land transactions, SDLT is charged at a single rate on the chargeable consideration. This is now replaced by a “progressive” system and there will be several rates payable according to the portion of consideration falling within each of the bands.
The new residential SDLT rates are. Property value band
SDLT rate
£0 to £125,000 or fi rst component thereof 0% Over £125,000 to £250,000 of value Over £250,000 to £925,000 of value
2% 5%
Over £925,000 to £1.5 million of value 10% Over £1.5 million of value
12%
For example, under the old rules, the SDLT on a residential property bought for £450,000 would
here were signifi cant changes made in the recent Autumn Statement with some key calls to action, Edward Walter, Partner at Buss Murton Law LLP looks at
be £13,500 (the entire consideration taxed at 3%). Under the new rules, the SDLT charge would be £12,500 (the fi rst £125,000 would be taxed at 0%, the next £125,000 at 2% and the fi nal £200,000 at 5%).
The effective rate of tax for properties with a chargeable consideration of less than £937,500 will now be lower than the effective rate of tax under the old rules.
However, there will be an increase in the effective rate for higher value properties.
Other changes to note are:
• Spouses and civil partners will be able to inherit their deceased spouse’s ISAs and ISA Allowance for deaths after 3/12/2014.
• From April 2015, the ISA allowance will rise to £15,240.
• The income tax personal allowance will increase to £10,500 for tax year 2015/2016 (up from £10,000 for tax year 2014/2015), and higher rate threshold to £42,385 (£41,865 for 2014/2015).
• Further changes to pensions – the tax treatment of pension annuity payments to dependents will be the same as that for fl exi-access withdrawals. A person dying under the age of 75 will be able to leave their surviving benefi ciaries a tax-free income. In addition, joint life annuities can be passed on free of tax to any benefi ciary. However, the age at which income tax relief is withdrawn from those making pension contributions remains at 75 years of age.
• Corporation tax relief given where a company acquires the goodwill of a business, where that business is acquired from a related individual or partnership, will be restricted.
• There will be enhanced penalties for those found to have engaged in offshore tax evasion from April 2016 onwards.
Edward Walter
• The disclosure of existing tax avoidance schemes (DOTAS) will be tightened up with the removal of some schemes that had previously been viewed as ‘safe’ by reason of the grandfathering provisions. In addition, the introduction of new hallmarks of such
DOTAS schemes and amendment of existing scheme hallmarks shows a desire to get tough on those who use such schemes.
Anyone who has used such schemes should be asking the promoter whether the scheme remains grandfathered or not, and, in the event that it no longer remains grandfathered, what the original promoter suggests should be considered now, in light of the changes.
• The proposed ‘single settlement Nil Rate Band’ will not now be made, but the removal of the Inheritance Tax advantages gained by the use of multiple trusts set up on differing days will remain for all such structures created after 6th June 2014.
This is welcome news, as the proposed single settlement rules could have had the effect that only Discretionary/Relevant Property Trusts of up to £325,000 could be set up during the lifetime of a single or divorced person, from the date of the single settlement rules coming into force. Or, in the case of a married couple or a same sex civil partnership couple, £625,000. In today’s climate, this may have caused signifi cant diffi culties for many.
It does, however, mean that such planning remains viable; trusts of up to £325,000/£650,000 may continue to be set up every 7 years as things remain, but for how much longer?
• Capital Gains Tax – gains made on or after 3rd December 2014 on the disposal of goodwill to a related close company will no longer qualify for Entrepreneur’s relief.
Edward Walter is a Partner at Buss Murton Law LLP and can be reached on
ewalter@bussmurton.co.uk www.bussmurton.co.uk or call 01892 510222.
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