As businesses and individuals across the country wait to see what is in store for their financial affairs and the wider economy, experts at international law firm Withers consider what the likely announcements might be
On Wednesday 23 March 2011, the Chancellor will deliver his Budget speech. As businesses and individuals across the country wait to see what is in store for their financial affairs and the wider economy, experts at international law firm Withers consider what the likely announcements might be.
Charities in need
Withers partner Christopher Groves says: “Charities have benefited from a government supplement on donations since the 2008 budget lowered the basic tax rate, thereby reducing the amount of tax that charities could reclaim under Gift Aid rules. The government said that this arrangement would be in place for three years and it is due to expire on 5 April 2011. The Treasury has indicated the relief would not be extended come Budget day so if you are thinking of donating through gift aid, it would be advisable to do so before April 6 to ensure the maximum value accrues to the charity.”
No more non-doms?
Partner Sophie Dworetzsky comments: “Ever since the coalition government pledged to review the rules on non-dom taxation in their 2010 Emergency Budget, there has been much speculation as to what changes might be in store.
“We believe that if any change is forthcoming, it is likely to take the form of a change in the application of the remittance basis charge and/or reform of the deemed domicile rules. We may see a system where all non-doms – rather than just those who have been resident for over seven years – would be subject to the annual £30,000 charge if they elect to be taxed on the remittance basis. It is also possible that under a new regime all long-term residents of the UK would be taxed as UK domiciliaries. This is already the case for inheritance tax (after 17 years of residence) and could be extended to income and gains tax.”
Inheritance tax – a splitting point?
Partner Sarah Cormack adds: “The subject of inheritance tax has been identified as requiring a full review, but it is perhaps one that would fully expose differences between the Conservatives and the Lib-Dems. It has been identified as a ‘longer term project’ and, although in the long term the Conservatives’ stated aim is to increase the nil rate band to £1,000,000, any change seems unlikely in this Parliament.”
Christopher Groves suggests: “The arts sector is particularly hopeful that the government will extend tax reliefs on gifts of works of art in order to encourage individuals to give them to charity during their lifetime rather than on death. It is also suggested that they may enact provisions allowing tax efficient giving through ‘lifetime legacies’ – whereby you can make an irrevocable gift to charity but retain use of the income stream or asset in question during your lifetime.
“These changes would encourage people who can give more to do so and are exactly the sort of thing needed to help bring the Big Society to life.”
Principle private residence relief
Sophie Dworetzsky says: “This relief exempts taxpayers from capital gains tax on the sale of their principle residence, but has come into the spotlight because of the provisions that allow taxpayers to choose which residence is their main one.
“The coalition is likely to simplify this and the introduction of anti-forestalling measures (such as restricting the ability to swap between residences) should not be ruled out – so that’s bad news for MPs fond of flipping. Taxpayers in a position to elect should therefore make sure that they have done so before Budget Day.”