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More than expected: Richard Leeson, Scottish Equitable

IFAs have more to consider than expected from this year&#39s budget. The incentives to small business owners in the form of reduced CGT will generate even more high-net-worth investors as those entrepeneurs sell businesses at or before retirement with consequent inheritance tax liabilities.
The announcement of a review of the rules on residence and domicile is potentially far reaching and a welcome opportunity to recognise the mobility of individuals. A lot will depend on the detail but it is possible the remittance rules will be withdrawn allowing non-domiciles to avoid income tax and capital gains tax on non-UK assets. This would increase the attraction of offshore bonds which currently do not benefit from this favourable treatment. There is the possibility of wholesale change to the basis of assessing an individual&#39s liability to tax – in most other countries individuals are charged to tax based on residence only. – This would mean that if they were physically present in the UK for say 183 days in a tax year then they would be liable for tax on worldwide assets. At present non-domiciles avoid IHT on non-UK assets until they have lived here for 17 of the last 20 years there are opportunities for advisers to recommend avoidance strategies including excluded property trusts.
The uncertainty caused by the “Melville” case has been clarified putting minds at rest on the subject of trust powers having a value for IHT purposes. This was a tax avoidance case heard in the court of appeal which suggested the inclusion in a trust of powers retained by the settlor would render the settlor liable to IHT. The IR has clarified this is not its understanding but confirmed anti-avoidance rules will apply to the offensive aspects of the case.

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