Welcome to the September 2023 issue of our international e-bulletin for private client, family office and trustee clients and contacts. The UK politicians seem to have come back from their summer recess with renewed impetus to contribute to the UK tax policy debate and we have seen a number of tax policy announcements and reform ideas in recent weeks. I give a round-up of these below, as well some of the other topical developments relevant to the UK-linked international private client community.
UK tax policy
On 5 September, Chancellor Jeremy Hunt announced that he will present an Autumn Statement to Parliament on 22 November 2023, to be accompanied by an economic and fiscal forecast from the Office for Budget Responsibility. The Autumn Statement is expected to announce the tax policies that will be included in next year’s Finance Bill and confirmed in the Spring Budget 2024. The government’s fiscal timetable was originally intended to be based around an Autumn Budget; however, political events in recent years, including Brexit and the change of Prime Minister last year, as well as the Covid pandemic, have disrupted the government’s fiscal schedule.
Speculation has begun on the likely tax measures that could be announced.
With a UK general election set to take place no later than 28 January 2025, the Conservative party will want to see the Chancellor include some vote-winning policies, such as tax cuts. Last year’s Autumn Statement included effective tax rises through a mix of tax threshold freezes and tax allowance reductions, so a tax sweetener is arguably much needed. This is unlikely to come in the form of raised tax thresholds, however, as the income tax personal allowance and basic rate of tax threshold, as well as national insurance contributions threshold and inheritance tax nil-rate band, are all frozen until April 2028. Capital gains tax (“CGT“) rates are already at a low level and can only realistically go up, and the CGT annual exemption is scheduled to reduce to £3,000 (from £6,000 in 2023/24) from April 2024. The dividend allowance is also scheduled to be reduced to £500 (from £1,000 in 2023/24) from April 2024. So, it is hard to see where any potential tax cuts are going to be positioned, and easy to understand why the Chancellor and Prime Minister have so far resisted such calls: their focus being on curbing inflation and bolstering financial stability.
There are rumours that the government will tinker with the pensions “triple lock” (the protection that guarantees state pensions will rise by the highest of inflation, earnings growth or 2.5%) to avoid a pensions rise of around 8.5% from April 2024. Such a move would be hugely unpopular, however, and would break a Conservative manifesto pledge, so the government will need to tread carefully, if at all.
It is possible that the Autumn Statement will include an announcement on the taxation of decentralised finance involving the lending and staking of cryptoassets following a consultation in this area over the summer.
Current opinion polls tell us that a change of government in the next general election looks likely. Whilst such polls are not always accurate, it is wise for international individuals and their advisers to keep one eye on the tax policies of the main opposition party, Labour.
Key amongst the rumours is that Labour would abolish the current “non-dom” tax regime under which non-UK domiciled, UK resident individuals can legitimately keep their non-UK income and gains out of the UK tax net for a maximum of fifteen years (albeit in return for payment of a £30,000 or £60,000 annual charge for longer-term UK residents). Camilla Wallace explains more in her article “Should I stay or should I go?“.
Labour’s Shadow Chancellor has recently ruled out any form of UK wealth tax should her party come to power, along with any increase in the rates of CGT or top rate of income tax. This could take some of the sting out of the tail for any non-doms who remain, but the party’s manifesto will need to be examined, when published, for any tax devil in the detail for high-net worth individuals.
Register of Overseas Entities
Despite the relative newness of the UK’s public register of beneficial ownership of non-UK entities holding UK land (the “Register of Overseas Entities“ – “ROE“), which came into effect from August last year, amendments are already being debated as part of the Economic Crime and Corporate Transparency Bill currently completing its passage through Parliament. Some of these proposed amendments have caught the headlines for their controversial nature, chief among them, the House of Lords’ attempt to amend the ROE legislation to require the UK Registrar of Companies to publish the names of parties to trusts whose trustees own overseas entities on the ROE; also, the Lords’ proposal to require property-owning overseas entities to update the ROE within fourteen days of any changes (rather than once a year); and to make it a requirement for company shareholders to state whether they are acting as a nominee. Those affected will be pleased to know that, on 4 September 2023, the House of Commons reversed these three proposed amendments, along with others, and the Bill is now back with the Lords to be reconsidered.
Unlike the majority of information disclosed for ROE purposes, information concerning trusts is not currently made publicly accessible for valid privacy and personal safety reasons. It is reassuring that this, as well as the fact the such trust data is already disclosable to HM Revenue & Customs and law enforcement authorities via the UK Trust Register, has been recognised. The money laundering and crime risks associated with trusts (albeit affecting only a small minority) is a topic that is constantly under discussion, however, and the government intends to launch a consultation before the end of 2023 on allowing third parties – such as civil society organisations and investigative journalists – to access trust data in certain circumstances. We will be monitoring developments in this area and will represent the interests of our clients in any feedback opportunities.