Whether it's tax relief or key Brexit issues, Corinne Staves examines what would truly influence the vote of the super rich in the upcoming election
Writing a manifesto is not an easy job. Not only will it influence the decisions of the UK’s voting population, but if the party is lucky enough to get into power then the party must stick to those promises, or risk criticism for breaking them (or both, as was seen in the government’s attempts in the last Budget to increase National Insurance).
The most recent Sunday Times Rich List indicated that HNWs are currently thriving in the UK, but what might they want to see in a party’s election manifesto?
Recent hikes in stamp duty land tax, the imposition of ATED and non-resident capital gains tax and now, we think, the extension of inheritance tax to properties held through vehicles has considerably increased HMRC’s takings from the UK property market. London property has been particularly affected due to the higher values it commands. Commentators observe that the property market has slumped as a result of these factors, as well as wider economic uncertainty.
Against that backdrop, HNWs would not welcome manifestos promising to revive the sort of mansion tax mooted by the Liberal Democrats before their fall from grace.
Having triggered Article 50, arguably the most significant constitutional move since joining the EU, MPs and wannabe MPs will now spend the next month talking about themselves in an attempt to win seats in the general election, rather than dealing with key Brexit issues. Let us hope that the EU citizens in the UK are not of a nervous disposition. Certainly those that are have already sought to secure their permanent residence cards and/or British citizenship.
Ideally a party’s manifesto will provide that the UK’s immigration policy should be clear and incentivise talent and wealth creators to come to – and stay in - the UK, whether or not these people originate from the EU or further afield.
Everyone recognises that a government needs tax revenues to pay the bills, and that it also needs some flexibility around taxation to do so. No-one is naïve enough to think that the best outcome for HNWs is as simple as lowering tax rates for the wealthy and high earners. However there are some areas where HNWs might welcome the prospect of change.
Entrepreneurs’ relief provides some relief for those that have nurtured and grown successful businesses by reducing capital gains tax to ten per cent, subject to a lifetime limit of £10 million of gains. Increasing the lifetime limit, or applying a limit for each business sale, might incentivise entrepreneurs not just to sell-up when the time is right, but to start again and build another strong and successful business in the UK.
The inheritance tax nil rate band has remained stagnant for many years. £325,000 has certainly not kept pace with increasing property prices. The headlines heralding the increased inheritance tax exemption for £1 million homes may have won (southern England’s) votes last time, but the reality is that the relief is much less generous and much more complicated, than those headlines suggested.
It has become a regular and unpopular feature of the UK’s tax system that individuals and businesses have had to plan on the basis of announcements and draft rules. New rules and regimes would become effective from 5 April, but would not actually become law until July or August.
This has been highlighted this year with the snap general election leading to vast swathes of the draft Finance Bill being dropped before it was rushed through. Many do not believe that this will fundamentally change the expected position, as the rules would probably be implemented by a new Government with effect from 5 April 2017 anyway. However, a significant number of international individuals planned to accommodate these changes and now find themselves in a position of limbo.
Even if the rules are implemented in the draft form in the summer (as would have been the case without the election), there were grave concerns about the grey areas and complexity in those draft rules, believed to arise from the speed with which the rules were prepared.
A manifesto pledge that would surely be welcomed by all: clear, simple and carefully considered rules, which become law before the date from which they start to affect people.
Corinne Staves is a partner at boutique private wealth law firm Maurice Turnor Gardner LLP