The election may have forced him to shelve all his post-Budget presentations but, with the Summer Finance Bill now crawling through Parliament, Neil MacGillivray is back ahead of the game. So what has caught his eye?
Conference season – of the financial services variety rather than party political – has kicked off with a bang. In three weeks alone I have had the privilege to speak at the Paraplanner Powwow, the James Hay Retirement Symposium and the Henry Stewart Conference, with a pretty full diary through until the end of November.
I have to say I tend to become a bit stressed before such events. The time taken to pull the presentations together, trying to ensure the content is relevant to the audience and then to go through our compliance regime while trying to retain some humour in the slides is a challenging and time-consuming process.
Things are, however, proving to be a bit easier this time round. With the Summer Finance Bill now crawling through the parliamentary process, there is a lot to talk about – but also a deep feeling of déjà vu.
The reason? 674 pages of the bill covers the bulk of the 80% of content in the Spring Budget that got dumped due to the calling of the General Election. In March, I could have wept after spending days pulling my Budget presentation together only to have to shelve it and look for other topics to cover. Now it has been resurrected, dusted down and, with a few minor updates, I am ready to go.
So what are some of the key changes that should be of interest to advisers? There has been a lot of coverage on the reduction in the money purchase annual allowance from £10,000 to £4,000 now, with confirmation the change will be back dated to 6 April 2017 – however it was always a strong possibility that this would happen.
I do sympathise with individuals who have taken benefits from a pension with the view they could still contribute up to £10,000 a year, as they appear to be the victims of policy made on the hoof. The same could be said for the reduction in the dividend allowance from £5,000 to £2,000 from 6 April 2018.
The biggest and most complex changes, in my view, are the amendments to the ‘deemed domicile’ rules, which will also apply from April 2017. The period to qualify as ‘deemed domicile’ is being reduced from 17 out of 20 years UK residency to 15 out of 20 years.
In addition it will not only impact on inheritance tax as it has done in the past but those caught will now be liable to tax on foreign income and capital gains tax on an arising basis. It is hard for many of us to consider the possibility of the UK as a tax haven but, for those who are UK-resident but non-domiciled, the ability to use the remittance basis and only be taxed on income and gains when they were received in the UK gave a great tax planning advantage.
‘Deemed domicile rules’
The legislation allows, as it has done for inheritance tax purposes in the past, an individual to create what are now to be called ‘protected settlements’. Providing the trust is set up prior to the individual becoming ‘deemed domiciled’ and no property is added once they become ‘deemed domiciled’, foreign income and gains will only be taxed when remitted to the UK. This is definitely something advisers will have to consider and discuss with clients who could be impacted.
Finally, there is the £500 annual tax exemption to cover advice on general financial and tax issues relating to pensions that can be provided to employees. This includes former and prospective employees and is set to be backdated to the start of this tax year. There are no doubts this could be a gateway for advisers to increase their client base and is a service well worth promoting to employers.
Assuming all the changes in the Summer Finance Bill become law, we will barely have time to draw breath as the whole process will start again with the Autumn Budget on 22 November. Here’s to hoping there is no repeat of the Spring Budget …
Neil MacGillivray is head of technical support at James Hay