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Spring Budget in focus

Friday 10 March 2017
Spring Budget in focus

As a Jersey trust company it's important that we closely watch the UK Government's Budget announcements and last week Philip Hammond presented the Spring Budget. 

Included in the 2017 Spring Budget were a number of issues relating directly to offshore trusts and we have summarised the measures likely to be of most relevance to the Channel Islands.

 

Property issues

In last year’s budget, it was announced that all profits realised on the trading and development of UK land by offshore property developers was to be subject to UK corporation tax from 5 July 2016. It was confirmed in the Spring Budget that all profits recognised in the accounts on or after 8 March 2017 are to be subject to tax, including those profits realised in respect of pre-existing contracts i.e. before 5 July 2016.  

The Government is to consult on bringing non-UK resident companies, which are currently chargeable to income tax, within the scope of corporation tax. If introduced, this will have a big effect on the taxation of the UK non-resident landlord scheme.

Plans to reduce the payment and filing window for Stamp Duty Land Tax (SDLT) from 30 days to 14 days have been postponed and will be introduced from 2018/19.

At the 2016 Budget, the Government announced an aim to deliver more frequent revaluations of properties – at least every 3 years. This will be consulted on and more detail is expected in the Autumn Statement 2017.

 

Offshore issues

QROPS - There were significant changes introduced with effect from 9 March 2017 regarding the taxation of Qualifying Recognised Overseas Pension Schemes ‘QROPS’.

A 25% charge will be introduced on the transfer of funds to a QROPS scheme. For those schemes that are non-occupational and established in a jurisdiction outside the European Economic Area, the jurisdiction must be regulated for pension providers. Jersey does not meet these requirements so going forward QROPS schemes cannot be established in Jersey. Existing Jersey QROPS will not be affected, provided the transfer was made before 9 March 2017.

Double Taxation - The Government has confirmed that it will review the Double Taxation Treat Passport scheme to assist foreign lenders and UK borrowers. This will simplify access to reduced withholding tax rates that are available for lenders resident in countries that have a double tax treaty with the UK.

The limit for the disregarding of a minor interest in UK residential property by an offshore company is to be increased from 1% to 5%.

Non-doms - In 2016 it was announced that UK non—domiciled individuals, who have paid the remittance basis charge at least once, will have a 2 year window of opportunity to segregate amounts of income, gains and capital within their overseas mixed funds. Following consultation this will be extended to mixed funds from years before 2007/08, as well as those from subsequent years.

 

Issues relating to UK finance:

Income tax

  • The personal allowance will increase to £11,500 for 2017/18.
  • The higher rate threshold will also increase from £32,001 to £34,001.
  • The tax-free dividend allowance will be reduced from £5,00 to £2,000 from April 2018.
  • The government is currently consulting on the taxation of benefits in kind, accommodation benefits and employee expenses as it has been recognised that different forms of remuneration are taxed inconsistently.

National Insurance

  • Class 2 NICs are to be abolished from April 2018.
  • Class 4 NICs will increase from 9% to 10% in April 2018, and to 11% in April 2019.

Corporation tax

  • It was re-confirmed that UK corporation tax will reduce to 19% for 2017/18 and to 17% by 2020.
  • There will be restrictions on the deductibility of interest for companies with effect from 1 April 2017 (awaiting legislation).

 

We look forward to receiving further updates on the changes to UK resident non-dom taxation regime with the publication of the Finance Bill on 20 March 2017.

In the meantime if you have any queries around the above issues please contact Director, Chris Cotillard or Tax Consultant, Hannah Roynon-Jones