UK Autumn Statement

Chancellor George Osborne delivered his Autumn Statement on 25th November. Very few new tax changes were announced this time.

Chancellor George Osborne delivered his Autumn Statement on 25th November. Very few new tax changes were announced this time.

Draft legislation for the Finance Act 2016 is due to be released on 9th December, and this is expected to contain information about:

• How dividends will be taxed under the new regime.
• How the new savings allowance will work (as all bank and building society interest will be paid gross from 6th April 2016 under the proposals).
• Removal of wear and tear allowance on furnished rental property.
• Deemed domicile status changes.
• UK inheritance tax for non-UK domiciles.

Here is a summary of the key measures in the Autumn Statement that may affect expatriates, depending on your circumstances.

Stamp Duty Land Tax (SDLT)

What is the proposed change?

From 1st April 2016, where UK residential properties are acquired as either second homes or as buy to let properties, SDLT will be increased by 3%.

From 6th April 2017, it is proposed that SDLT will be due within 14 days of the transaction giving rise to the tax.

What impact will this have on expatriates?

Where expatriates already have UK residential property, this will not impact them. However, for those thinking about buying such property, this will affect them. It is not clear yet how this will impact people resident outside the UK, but if the property is not to be immediately used as a main home, they are likely to have to pay this additional tax.

If you are already in the process of purchasing, you are unlikely to be affected, but if you are thinking of purchasing such a property, you need to consider the additional cost. Even the cheapest properties will be subject to SDLT under this change.

Alternative investments may be more cost-efficient.

Deeds of Variation

What is the proposed change?

It was proposed in the Summer Budget that Deeds of Variation would be curtailed, as these have been used to minimise or avoid UK inheritance tax (IHT).

It was announced that no change will be made to the use of Deeds of Variation, although use of these to change the UK IHT position will be monitored.

What impact will this have on expatriates?

None for the time being, as these deeds of variation can continue being used.

They can be very useful, particularly when combined with trusts for Spanish residents, and can also help with assets skipping generations for UK IHT.

Capital gains tax due date – sale of residential property

What is the proposed change?

From 6th April 2019, payments on account of UK CGT on residential properties will be due within 30 days of the date of sale of the property for both residents and non-residents of the UK.

It will not apply to properties used as a principle private residence in the UK.

What impact will this have on expatriates?

Tax will be payable much sooner, so instead of having potentially between 10 and 22 months to pay, some money will have to be paid within 30 days. If further tax is due, you will need to set these funds aside.

General Anti-Abuse Rule (GAAR) penalties

What is the proposed change?

Where GAAR is successfully invoked, the penalties will be increased to 60% of the tax due.

What impact will this have on expatriates?

Only those who have avoided tax using abusive means will have concerns about this.

It is worth noting that all of the disclosure opportunities available, such as Liechtenstein, Jersey, Guernsey and the Isle of Man, will close early to new notifications on 31st December 2015 instead of the original dates. This is because of the Common Reporting Standard and automatic exchange of information starting in various jurisdictions from 1st January 2016 (with first information exchange in 2017).

For those who do need to regularise their affairs, the opportunity to use one of the disclosure facilities is fast running out. Taking action now can avoid more serious penalties and sanctions in future.

UK state retirement pension

What is the proposed change?

From 6th April 2016, the basic UK state retirement pension will increase to £119.30 per week. A new, single-tier system will come into place at that date, which gives an overall minimum state pension (including what would have been SERPS etc under the old system) of just over £155 per week.

What impact will this have on expatriates?

While the increase is only around £3 per week, this is more impressive than the 75p per week increase some years ago.

As before, UK state pension income remains taxable in Spain.

Tax rates, scope and reliefs may change. Any statements concerning taxation are based upon our understanding of current taxation laws and practices, which are subject to change. Tax information has been summarised; an individual is advised to seek personalised advice.