The UK Chancellor has today put on hold a series of “significant clauses” from the Finance Bill (no2) 2017 that affect the international advice market.
Among the shock changes that will be seen as a surprise in some quarters of the international financial advice community, includes the deemed domicile change that came into force on 6 April, and reduces the period of time someone needs to be living in the UK before they become deemed UK domiciled for tax purposes, from 17 out of 20 years down to 15 out of 20 years.
The move is among a number of changes that were announced this afternoon, as the UK Chancellor performed another policy U-turn, in the run-up to the June 8 election, although there is no reprieve for the controversial QROPs levy.
On the deemed domicile changes the UK government’s announcement means that these changes will now no longer apply and are officially “on hold” until after the election.
Other changes on hold include IHT changes on enveloped dwellings. From 6 April 2017 any non-UK domicile who has purchased property in the UK through an overseas corporate structure (commonly known as enveloped dwellings) will no longer be exempt from UK inheritance tax.
Bonds and life insurance changes
On the Finance Bill (no2) 2017’s proposed changes to personal portfolio bonds, to provide legislation to allow the widening of assets by regulations, which could be held as a qualifying investment within a personal portfolio bond in the UK, no date has been set for when regulations would be issued.
On life insurance policies: recalculating gains on part surrenders, this change was due to give HMRC the power to correct policies where a withdrawal had been taken in the wrong way and resulted in an inequitable tax charge being applied. The government said that there is a timescale within the legislation on which a claim could be made (i) the four tax years following the tax year in which the gain arose, or (ii) such longer period as the officer may agree.
Rachael Griffin, financial planning expert, Old Mutual Wealth, said that the announcement today that certain “significant clauses” have been “cherry picked for exclusion” from the Finance Bill will come as a surprise to many international advisers.
‘Confusion and uncertainty’
“The clauses which have been put on hold are expected to be included after the general election in a third Finance Bill, but when this will be is, as yet, unclear,” said Griffin. “This will undoubtedly create confusion and uncertainty for many people – both inside and outside the UK.
“Some areas are more controversial than others; especially where it effects legislation which has already come into force – such as the deemed domicile changes. Any non-domiciles approaching the 15 year point who have already taken action to rearrange their finances in light of the 6 April deadline may be disappointed by this latest announcement.
“They may have already sold overseas property or placed assets into a trust, many may have even left the UK and relocated overseas,” she said.
Griffin said that understand the frustration of those who have sought advice in order to put their financial matters in order with the 6 April in mind, however, she does expect to see a new Finance Bill with the clauses firmly reinserted shortly after the election – “provided the Conservatives win,” she added.