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All parties have now published their election manifestos.  Each contains proposals which would affect business owners and entrepreneurs.I previously predicted that altering or abolishing CGT Entrepreneurs Relief would be fairly low-risk for an incoming Chancellor of the Exchequer.  It seems that is coming to pass.This update briefly summarises the key proposals of the UK’s three main nationwide parties relating to entrepreneurs and business owners.LIBERAL DEMOCRATSThe Liberal Democrats have least to say about Entrepreneurs Relief, not directly mentioning it at all.  Relevantly, they would abolish the CGT annual exemption (currently worth £12,000).  They would also introduce a new General Anti-Avoidance rule (presumably in place of the current General Anti-Abuse Rule) and increase Corporation Tax to 20%.LABOURLabour’s manifesto contains a great many tax proposals.  Taxpayers earning more than £80,000 a year are warned that they will face higher taxes overall.  The headline rate of Corporation Tax would increase to 26% by 6 April 2023.  Meanwhile, CGT rates would be harmonised with Income Tax and Entrepreneurs Relief would be abolished outright and Labour would “consult on a better form of support for entrepreneurs which is not largely just a handout for a small number of people.”CONSERVATIVESThe Conservatives comment that “some [tax] measures haven’t fully delivered on their objectives” and, as a result, they propose to “review and reform Entrepreneur’s Relief.”  They have not yet brought forward details of their proposed reforms, nor set out the intended timescale for implementation.  Separately, they intend to freeze Corporation Tax at its current rate of 19% (abolishing prior plans to reduce it to 17%).  On the other hand, the R&D Tax Credit rate is to increase to 13%.  In what they call a “triple tax lock”, they promise not to increase VAT, Income Tax or National Insurance during the Parliament.  In fact, they propose to increase the NI threshold to £9,500, with plans to ensure that the first £12,500 of earnings is completely tax-free (though with no timetable for that move).NEXT STEPSIn my last update, I reflected that changes to the prevailing tax regime would be unsettling for business owners.  But such changes are an inevitable part of the election process.  I advised that affected business owners – especially those looking to dispose of their businesses in the near future – should seek tax advice as soon as possible.  That advice still holds good.

In what is becoming a near-annual sport, there are again renewed calls for the restriction or outright abolition of CGT Entrepreneurs’ Relief.The latest high-profile support for the move comes from Sir Edward Troup, previously the head of HMRC, in response to a campaign launched by the Guardian newspaper.Such reports are always unsettling for business owners who are in the process of (or at least contemplating) the sale of their business.But how short are the memories of some of those who are contributing to this debate: far from being a give-away for the rich, when Entrepreneurs Relief was introduced in 2008, it represented a significant restriction on tax relief for business owners.  Previously, they had the benefit of business asset taper relief and retirement relief (un-capped by value), which gave far greater tax savings in many cases.This point alone does not answer bona fide and knowledgeable policy objections to the Entrepreneurs Relief regime, but those are – yet – few in number.Further agitation of this sort is likely to unsettle business owners who had assumed that they would benefit from Entrepreneurs Relief in due course.  So what are they to do?Irrespective of the colour of the next government, big new spending commitments seem likely.  These will need to be paid for one way or another.  Business owners should not make the mistake of believing that frequent complaints about Entrepreneurs Relief followed by inaction will continue forever.  Entrepreneurs Relief costs HM Treasury approximately £2.7bn a year – about three times more than intended when it was first introduced.  There are plenty of those in Government, as well as outside, who would like to bring that cost down or eradicate it altogether.Difficult though it might be for some business owners to accept, the political reality is that trimming or abolishing Entrepreneurs Relief is a relatively easy and low-risk option for a Chancellor in need of funds for high-profile new spending commitments.So prudent business owners would be wise to pre-empt possible changes to the regime where possible:If a business sale is in process and it is possible to exchange contracts before the new Government takes office on Friday 13 December, then it would seem preferable to do so;That said, CGT rate changes in the middle of a tax year are extremely uncommon and lead to a number of technical problems for HMRC and taxpayers, so on balance any change of the rules should be unlikely to take effect before 6 April 2020.  It follows that – unless the new Government takes unexpectedly radical action – business owners wishing to sell should endeavour to exchange contracts by that date;For those looking to sell in a longer timeframe, it was in the past possible to take steps to “lock-in” to Entrepreneurs Relief rates before a change in the law, but the law, HMRC practice, and the approach of the Courts and Tribunals have all moved on in recent years.  Anyone wishing to investigate this will need to take expert legal advice in good time before any change in the rules;Lastly, for those with no sale at all in prospect, the Entrepreneurs Relief regime is of little practical relevance to them.  There seems little they can do now other than hope for a benign tax system when they do eventually sell.

The new figures released by HMRC are not surprising given the tax legislation that has been introduced steadily over the last 10 or so years, which has been designed to attack the tax regime available to non-domiciliaries resident in the UK. That said, the “non-dom” regime is still a very effective planning tool for non-domiciliaries and HNW individuals should strongly consider taking advantage of the regime while they still can.One part of this article in particular should be clarified:HMRC said the number of non-doms had also fallen because some had chosen to change their status to be UK-domiciled after the government introduced an annual “non-dom levy” of between £30,000 and £60,000. The levy, as of April 2017, allows non-doms to continue to pay no tax on offshore income and capital gains, unless they bring the money to the UK. The levy raised just £315m last year.It is correct that non-domiciled individuals who have been resident in the UK for over a certain amount of time must pay an annual charge in order to access the more-favourable remittance basis of taxation. This was the case before April 2017 and has continued to be the case in the period since.One of the key changes in April 2017 was that non-domiciliaries can no longer reside in the UK indefinitely whilst continuing to shield their non-UK income and gains from UK tax. Once an individual has been UK resident for 15 out of the previous 20 tax years, they are automatically UK deemed domiciled and will be taxed on their worldwide income and gains as they arise.It is not correct that this change means individuals are ‘changing’ their status to be UK-domiciled. It is true that non-domiciliaries can elect on a year-by-year basis whether to be charged on the remittance basis or the arising basis, the former of which is not available to UK domiciled individuals. It is also true that non-domiciliaries can elect to be treated as UK deemed domiciled for inheritance tax purposes. It may be that the author is conflating these concepts.So the reason why HMRC’s revenue from the remittance basis charge has fallen could be attributable to more factors than the article suggests:More individuals may indeed be leaving the UK.As remittance basis users can elect whether to be taxed on the remittance basis in any given year, non-domiciliaries may be getting wiser as to when to pay (or not to pay) the annual charge. The charge is only worth paying if the income and gains being shielded amount to more than the corresponding charge.Since April 2017 there are many UK resident non-domiciliaries who now fall foul of the ’15 out of 20′ rule above. These individuals have all become UK deemed domiciled and the remittance basis of taxation is no longer been available to them. Before April 2017 these individuals could have happily continued to pay the remittance basis charge and so, necessarily, the revenue from the charge will have decreased.If anything, therefore, the fact that there are HNW individuals who were previously non-domiciled and who have decided to stay in the UK shows that the UK continues to be a jurisdiction where wealthy individuals want to stay. It also shows that these HNW individuals are driven by many more concerns than simply their tax liabilities.

The Office of Tax Simplification (OTS) has published a number of recommendations for how inheritance tax (IHT) could be amended and simplified. While these amendments do not go so far as to shake the foundations of the tax itself, nevertheless the proposals would require all practitioners to come to terms with the amendment of a number of rules that have stood firm for decades.Some of the key proposals include:1. Reducing the current IHT period during which lifetime gifts are brought into account on death from 7 years down to 5 years and, at the same time, abolishing tapering relief on chargeable lifetime gifts.2. Replacing/reforming some existing lifetime IHT exemptions (such as the annual exemption, the exemption for gifts in consideration of marriage, and the exemption on normal expenditure out of income), with an overall personal gifts allowance.3. Removing the CGT uplift on assets that pass free from IHT due to an exemption. In effect that would mean that the recipient would receive the asset at the deceased’s base cost, akin to hold over relief.4. Making it so that death benefit payments from life insurance policies pass free from IHT without the need for the policies to be written into trust.It will remain to be seen whether any of these proposals are considered any further by the Law Commission or the Government. The Labour Party has already published a policy document suggesting further, more radical amendments to the UK tax code in general and so one suspects that the above proposals will only survive so long as the Conservative Party remains in power.

This research should serve as a good reminder to everyone that it is important that your family and professional advisors know what funds you have in what accounts. Should the unthinkable happen tomorrow, would your executors know what monies they must account for, and possibly pay tax on?Lack of certainty can have a number of impacts. For one thing, executors are under a duty to account to HMRC for tax due to the date of death and during the administration period. However, should further funds come to light at a later date this will drag out the administration process. In addition, small sums held in bank accounts can be applied towards the estate’s inheritance tax; banks will often release small sums without requiring a grant of probate which, in a catch-22 scenario, the Probate Registry will not release until inheritance tax has been paid.These undiscovered sums are also monies that should be passed to the relevant beneficiaries under the deceased’s Will, or according to the intestacy rules if the deceased died without a Will. If those funds are substantial, they may represent a valuable benefit to that recipient rather than languishing in an account.Clients should make the lives of their executors and professional advisors as straightforward as possible and provide them with a schedule of their assets, including details such as the names of third party account holders and any relevant account numbers. As and when these details change it can be very useful to provide an updated schedule, for example at an annual estate planning meeting.

Johnson’s announcement of his proposed tax cut is certainly grabbing the headlines but it is worth pausing to reflect on the ways it might impact professional advisors and their clients.Journalists quick out of the gates this morning have estimated that raising the threshold at which 40% income tax is paid from £50,000 to £80,000 will save an individual earning £80,000 per year around £3,000. Indeed, for pensioners the cut could be even more beneficial, with estimated savings of up to £6,000 due to the fact that pensioners will not be liable for the increase in National Insurance which is feted to accompany the cut to help pay for it.With more take-home pay in their pockets, tax payers may feel less inclined to take advantage of tax mitigation opportunities such as Gift Aid or maximising their pension contributions.One can be confident that Mr Johnson and his team have rigorously focus-grouped the proposed plan, but it is worth noting that the tax cut is not being achieved by lowering the income tax rates, which Mr Johnson’s rival for the Conservative leadership Dominc Raab suggested only last month, but instead raising the threshold at which higher rate income tax is paid.

Harry, Meghan and their child will find themselves in a position familiar to any US taxpayers living outside the US. The potential liability to both US and UK tax is one which can become complicated quickly, however there are solutions that can help clients avoid taxation in both jurisdictions (even if it still leaves them with a headache!).The UK and the USA have entered into a number of double tax treaties, under which the two jurisdictions agree which authority has the primary taxing rights in various circumstances. It is worth remember though that the US and UK tax years do not cover the same period (US tax years ending 31 December and UK tax years ending 5 April) and so clients need to ensure that any planning is carried out at the appropriate point to ensure that the requisite criteria are achieved.A further headache is over who each jurisdiction considers the ‘taxpayer’. In certain circumstances this might not be the same person or entity and, consequently, one jurisdiction might not offer a credit for tax paid in the other jurisdiction. It might also be that one jurisdiction offers a relief or exemption which is not matched in the other jurisdiction, thus leaving the taxpayer with an unexpected liability. For example, UK taxpayers can usually claim 100% relief from capital gains tax on the sale of their main residence. However, the corresponding US allowance is only on the first $250,000 of gain. it may be therefore that a UK resident, US citizen will find themselves with a US tax charge on the sale of a UK property which is standing at a significant gain, even though the UK itself doesn’t charge.It is possible for a US citizen to ‘expatriate’ (i.e. give up their citizenship) and thus extricate themselves from the US tax regime. However, in order to expatriate without being liable for a punitive exit tax charge or suffering under the yoke of being a ‘covered expatriate’ (which comes with significant tax disadvantages), clients must ensure they do not meet any one of several criteria.Fortunately, for children born to UK/US parents there are several avenues which may allow the child to give up their US citizenship without reference to most of these criteria.The new royal baby will be born into a complicated, unusual and, at times, baffling system. And that’s just the Royal Family.