Monthly Archives: September 2018

Dominic Cole and Peter Daniel analyse the ways in which individuals can achieve the full sale price of their businesses (with some help from Mr Benjamin Franklin). What the article highlights is that the tax landscape for owner-managers can be complex as various taxes cross over at different points in a business’s lifetime.Given that a number of tax reliefs and exemptions require that shareholdings have been owned for a specific period of time before a chargeable event (notably Entrepreneurs Relief and Business Property Relief for capital gains tax and inheritance tax respectively), owner-managers should plan well in advance of any sales of gifts.

I was interested to read that James Hambro have suggested to clients that they may want to consider reviewing assets standing at a gain to see whether they wish to dispose of them now in the expectancy that Capital Gains Tax (CGT) rates will increase after the next budget.CGT is sometimes regarded as a tax on the wealthy, and therefore could be seen as a good target for increased taxation politically. In fact, as identified by St. James Place (https://www.sjp.co.uk/wealth-management/tax-year-end-2018/capital-gains-tax), HM Revenue and Customs raises more money from CGT than it does from Inheritance Tax. If you sell any investments that were not held in a pension fund or an ISA, you could be liable for CGT on the profits you earned. The same goes for sales of buy-to-let property or, indeed, any property which is not your main residence. CGT therefore affects many more people than some may think and any political maneuvering to increase rates could be felt widely.

The Telegraph reports this morning that many executors are not aware that they are liable to pay taxes on income produced by estate assets during the administration period.Executors are personally liable to pay the tax and therefore, if they distribute the whole estate thinking there is nothing else to pay, they may find themselves hit with a liability they do not have the funds to meet. Assets such as cyrptocurrencies and more sophisticated investments can make estates more complex and executors may feel that they need to take an increased amount of advice to ensure that all liabilities are dealt with properly.

Peter Daniel and Dominic Cole provide a keen insight into the Office for Tax Simplification’s proposal that the reliefs available to owner-managed business be simplified.I found one point particularly interesting. The authors highlight that there is an uneven playing field between 10% Entrepreneur’s Relief for those who establish their own business (and only then up to a lifetime maximum of £10,000,000), compared to tax-free gains through SEIS/EIS for investors (with no lifetime cap). This surely only works to discourage individuals from setting up in business themselves.Hurdles such as these must surely prejudice businesses towards outside investment compared to internal growth driven by owners. Hopefully if the OTS’s proposals are taken on board by HMRC they will review the entire landscape in a holistic manner.

Vince Cable has suggested the creation of a ‘citizen fund’ to help the wider population benefit from investment returns.Of particular interest is the suggestion to abolish inheritance tax and instead tax gifts during people’s lifetimes. Lifetime giving can still be a very efficient form of estate planning in the right circumstances but replacing tax on death is unlikely to encourage people to give assets away during their lifetime. Further, the current exemptions are not all the generous and many people already fall foul of the current limits.The other suggestions such as putting ‘capital gains tax at the same level of income tax’ would more likely have a larger impact on the government purse, but will likely prove unpopular, particularly with small business owners who may be already feeling the squeeze due to increased costs.

HMRC failed to apply the 7.5% basic rate dividend tax credit to non-resident trustees in the tax year 2016/17. HMRC has confirmed that it is aware of the issue and that it has resolved the problem for the 2017/18 trust tax calculations, but has not yet confirmed how it intends to respond.These oversights demonstrate the importance of reviewing self assessment tax returns carefully. It is critical that non-resident trustees take appropriate advice if they feel that they may have been exposed to the error. When even HMRC are prone to such lapses it really does highlight the increasing speed with which the offshore tax landscape has changed.