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Summer Budget 2015 - Round up of comments

Summer Budget 2015 - Round up of comments

Trowers & Hamlins partners comments on announcements made in the Summer Budget 2015

Andrew Sneddon, partner and Head of Tax, comments on non-dom status for long-term residents being abolished:

"It is not surprising that the government is targeting non-domiciled taxation rules, but there is concern that the abolition of permanent non-domiciled status for long-term residents risks an exodus of wealthy individuals prior to reaching 15 years residency. Such individuals will need to review their position before April 2017."

Click here to read more in Spear's, and Portfolio Adviser.

Corporation tax rates:

"In the Budget statement today the Chancellor announced further and unexpected reductions in the rate of corporation tax on companies. The rate will reduce to 19% (from 20%) from April 2017 and to 18% in April 2020. This means that as from April 2017, companies will pay less than the basic rate of income tax. The UK's historically low corporate tax rates will make the UK even more competitive internationally, and domestically should further encourage the incorporation of businesses."

Inheritance tax change for the family home:

"As expected, in today's Budget the Chancellor announced an additional Inheritance Tax allowance which will be available where the family home is left to children or grandchildren.  As the allowance will be transferrable between couples, this could result, in effect, in a combined £1 million threshold before inheritance tax is payable.  The additional allowance will be phased in over five years from April 2017. 

"In an interesting move, the Chancellor also announced that the allowance will remain available after a downsizing.  This is an opportunity for families to review their affairs and how these changes may affect them."

Further changes proposed to the taxation of residential property:

"Whilst the Chancellor wants the UK to remain open for business on the international stage, this sentiment does not seem to apply to international investors in residential property.  Currently a non-domiciled individual would be liable to inheritance tax if they own a property in their own name but not if they own it through an offshore company structure.  In a further expansion of the UK tax net, which is likely to discourage inward investment into residential property, the Chancellor has proposed that this will change from 2017.  Overseas individuals, who may not even be liable to such a tax in their own jurisdiction, may well choose to sell up or not to invest if they are now at risk of having to pay 40% inheritance tax on their investment into UK residential property.  Others will feel aggrieved at the piecemeal way in which the Government has increased the tax burden in relation to residential property over the last few years rather than being clear about their plans from the outset."


Ian Graham, real estate partner, comments on the reduction of social housing rents charged by local authorities and housing associations which were outlined in the Budget:

"Today's Budget contained a number of measures we were expecting and one we certainly weren't.  The proposal to reduce rents charged by social landlords by 1% per annum for four years is a significant shift from the previously stated policy of rent increases of CPI plus 1% per annum.  The last government made much of its 10-year rent settlement for the sector.  It was hailed as providing the certainty required to allow confident forward planning.  This reduction in rents will reduce bodies' capacity to develop.  The OBR suggest that it will mean 14,000 fewer affordable homes.  Aside from that, what impact will it have on the confidence of investors into the sector?"

Click here to read more in 24 Housing and Construction News (pay wall). 

The 'pay to stay' scheme for local authority and housing association tenants:

"As trailed in the press, the Chancellor today announced that the Government will consult on the introduction of a compulsory "pay to stay" scheme for local authority and housing association tenants.  This will mean tenants who earn over £30k outside London and £40k in London having to pay a market or near-market rent.  Additional income generated by local authorities will go back to the Treasury; housing associations will be able to keep it to reinvest in new housing.  No doubt Government will argue that, at least for housing associations, this will go some way to offset the reductions in rent of 1% per annum that have also been announced.  Whether it will or not only time will tell. 

"The practicalities of such a scheme will require careful thought.  How will any landlord know what their tenants are earning?  They can of course ask, but what will happen if they get no response?  Will the default then be that rents go up?  These and a host of other issues will no doubt be the subject of the consultation later this year."

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