Sat 22 Nov 2014
The Taxation of Pensions Bill 2014 (TPB) will enact the tax changes enabling flexibility of pension draw-down. Changes were announced to the tax treatment of funds remaining in a personal pension scheme on the death of the member. Under current rules, any pay-out to the deceased’s beneficiaries is taxed at 55%. The Government is abolishing this so called “death tax”. The government have now tabled additional provisions to TPB to give effect to these proposals.
Another Schedule is added to TPA providing that persons other than dependants can inherit unused drawdown funds. For deaths before age 75, lump sum death benefits and flexi-access drawdown pensions from these funds can be paid tax free, subject (for example) to the deceased member having sufficient available lifetime allowance.
If the member of the scheme is over the age of 75 at death, pay-outs from the funds will be treated as income for income tax purposes in the hands of the beneficiaries when they draw them, not on the death of the scheme member.
Undrawn pension funds have huge inheritance tax advantages – the benefit of payments from a pension scheme is not a transfer of value for IHT (IHTA 1984 s12).
Reduction of pensions lifetime allowance As announced in the March Budget the lifetime allowance (LTA) will be reduced from £1.25m to £1m, with effect from 6 April 2016. Protection arrangements will apply. The LTA will be indexed in line with the CPI in 2018/19 and subsequent years, with the allowance always being rounded up to […]
The Chancellor’s Budget announcement today contained a raft of giveaways for business but how will it affect you personally? Currently tax relief on pension contributions is limited to the annual allowance of £40,000. However, if your ‘threshold income’ exceeds £110,000 and ‘adjusted income’ (i.e. including employer pension contributions) exceeds £150,000, the annual allowance starts to […]
The annual pension allowance was reduced from £50k to £40k as from 6 April 2014 but where the allowances were not fully used in 2011/12, 2012/13 or 2013/14 the relief brought forward is the actual unused remainder of the £50k allowance, always using the earliest available allowance up first. So for example, an individual who […]
The case of Routier and Venables v HMRC concerned a bequest to charity under the will of C and possible relief from inheritance tax (IHT) under IHTA 1984 s 23.
HMRC has announced that “Pension providers will soon be sending annual allowance pension statements for the 2013 to 2014 tax year to all pension scheme members contributing more than £40,000 per year to a pension scheme.
The legislation to implement the fundamental change to the tax rules for pensions will be a one-off separate act of Parliament, not in a finance act. The new rules have to be enacted well before they take effect on 6 April 2015, hence the Government have been forced to take this unusual step of the […]
HM Treasury have issued a paper giving an update on aspects of the radical reform to the pension tax rules, announced in the Budget that will take effect in April 2015. It also covers ramifications such as the way that scheme members and schemes will receive fair unbiased advice.
The Confederation Fiscale Europeenne (CFE) (a pan European body representing tax professionals) has published examples of specific examples of cross-border IHT problems encountered by its members.
Every employer must automatically enrol workers into a workplace pension scheme who: are not already in one are aged between 22 and State Pension age earn more than £10,000 a year work in the UK The Pensions Regulator has now started contacting small and micro-sized employers (those with less than 50 employees).
The proposals to simplify trust exit and ten-year anniversary (TYA) charges, due to come into effect on 6 April 2015 have been modified in the consultation document Inheritance tax: A fairer way of calculating trust charges issued by HMRC on 6 June 2014. These are the new restrictions on the nil-rate band available to trusts […]
The new Inheritance and Trustees’ Powers Act 2014 (ITPA 2014), due to come into force on 1 October 2014 includes changes affecting how: intestate estates are distributed; and trustees can distribute income and capital to beneficiaries These changes apply to individuals domiciled in England and Wales at date of death. The changes are of no […]
The major part of the reform of IHT on trusts concerns the ten year charge (formally the “principal charge”) on trusts. However, proposals made in the 2013 Budget would have meant that no matter how many trusts a settlor might set up in lifetime, all those trusts could only share one nil-rate band (NRB). One […]
George Osborne delivers the Coalition’s final Autumn Statement in the House of Commons on 3 December. We reckon he’ll use this opportunity to remind us of the economic achievements of the Coalition, but will there be carrots promising reductions in future tax bills? By good fortune or good judgment, the UK’s economic performance is top […]
The annual pension contribution limit operates by reference to pension input periods (PIPs). Each pension fund has its own PIP and all contributions within a PIP are treated as made in the year in which the PIP ends for the purposes of the annual limit charge. On 14 October 2010 the Government announced the rules […]
HMRC have published updated guidance notes on individual protection (“IP2014”) from the pension lifetime charge. IP2014 was announced in Budget 2013 alongside the reduction in the lifetime allowance from £1.5m to £1.25m. Most individuals with more than £1.25m of pension saving on 5 April 2014 are entitled to apply for IP2014. Applying for IP2014 gives the […]
The most significant announcement in this year’s Budget was of greater flexibility on retirement for people with defined contribution pension schemes. It is no longer compulsory to purchase an annuity, and it will still be possible to take out 25% of the pension pot as a tax free lump sum. The main changes will come […]
Individuals who have established trusts need to be aware of forthcoming changes to their tax treatment, due in April 2015. Those looking to use trusts as part of a wealth management/succession plan will need to consider whether the use of a trust is still worthwhile. The first phase of the changes aimed at simplifying the […]
Before the Budget we all thought we knew broadly where we were on pensions and ISAs. On pensions the new rules on lifetime limits were on everyone’s mind with the April 2014 reduction of the limit from £1.5 to £1.25m, and the need to consider fixed protection against the reduction. The expectation was that the […]
Today George Osborne delivered his fifth budget, and probably most important, of his tenure as Chancellor. In the run up to today, all the talk was about a Budget for business to maintain confidence in the economy with a specific focus on helping house-builders, exporters and reducing energy costs. With a general election only 14 […]
The first phase of the changes aimed to simplify the way in which inheritance tax (‘IHT’) is charged on trusts will be introduced from April. Their stated intention is to be tax neutral but they look likely to increase trusts’ tax burdens. The HMRC consultation process has so far demonstrated that the position will be […]
April 2014 sees the pension lifetime allowance (LTA) cut from £1.5 Million to £1.25M. HMRC estimate that 30,000 people will be immediately affected by the cut and the consequences of breaking the limit are significant, a potential 55% tax charge on a part of your pension funds. The lifetime allowance (LTA) is the maximum amount […]
Best (Buller’s executor) v RCC (UKFTT 03217) follows the example set in HMRC v Lockyer, executor of Pawson in refusing BPR on a property letting business. Best differs from Lockyer in facts but not in principle. The differences are that: in Lockyer the property concerned was a single furnished holiday property that was accepted to […]
The professional bodies have issued a technical release on the availability of BPR in two situations. Firstly, where shares in unquoted trading companies are held by partnerships or LLPs. Secondly, where surplus cash is held by businesses and companies, which has been increasingly common in recent economic conditions. BPR treatment of Partnership/ LLP Interest in […]
Politicians in both parties which make up the coalition have announced proposals to change tax aspects of pensions.
Despite all the media hype around Inheritance tax and thresholds, there were no NEW announcements regarding Inheritance tax or were there? There was a cryptic comment in the Budget speech regarding restricting the use of deeds of variation as if these form part of tax planning which can be considered tax avoidance. Deeds of variation can be used within two […]
The Chancellor today announced that he will abolish tax on annuity payments that are made to spouses after their partner has died. This applies to married pensioners. Currently surviving partners of spouses with joint life or guaranteed annuities must pay tax on the income payments they receive from a joint life annuity. Typically, this is […]
In the Autumn Statement, Philip Hammond announced proposals for the pensions Money Purchase Annual Allowance to reduce from £10,000 to £4,000 per annum, with effect from April 2017. Since April 2015, pension savers have enjoyed increased freedom of choice in how they access their pension savings. This has given them the opportunity to structure their […]
Less than a week to go before the Requirement to Correct (RTC) deadline of 30 September 2018 elapses. RTC requires taxpayers to make a disclosure of any undeclared tax (Income Tax, Capital Gains Tax and Inheritance Tax) arising before the 6 April 2017 from offshore matters or transfers. The 30 September is also a significant […]
The UK Government has introduced a raft of legislation to address tax evasion and latterly tax avoidance. This has included; The Requirement to Correct legislation which has introduced punitive offshore penalties and extended assessing time limits for Income Tax, Inheritance Tax and Capital Gains Tax to 5 April 2021 and, Enhancing automatic exchanges of information […]
The Chancellor announced in his 2017 Autumn Budget that the Government will publish a consultation in 2018 on how to make the taxation of trusts “simpler, fairer and more transparent”. This won’t be the first time that the Government has consulted on trying to simplify the taxation of trusts. The last consultation in 2014 came […]
Recent changes in the domicile rules affecting an individual’s inheritance tax (IHT) non-domicile status can have serious effects on trusts they have set up. Overseas assets settled on trust when the settlor was non-domiciled are excluded property for IHT purposes which means those assets are not liable for IHT charges when they become or cease […]
We now know that inheritance tax benefits previously associated with the use of corporate structures to hold UK residential property will be removed with effect from 6 April 2017. The new rules treat the interest in the holding entity as subject to UK IHT. Previously it could be exempt in the hands of a non-UK […]
Power Adhesives Ltd. almost came unstuck when, under the guidance of their advisers, the Company adopted an inappropriate arrangement to remove the possible problem of having to repay a director’s loan account on death. The arrangement made, for non-tax reasons, would have created an IHT liability on an amount far greater than the loan itself. […]
A company almost came unstuck when, under the guidance of their advisers, the Company adopted an inappropriate arrangement to remove the possible problem of having to repay a director’s loan account on death. The arrangement made, for non-tax reasons, would have created an IHT liability on an amount far greater than the loan itself. The […]
It is said that the real sign that a ship is in trouble is not when the rats jump overboard but when the officers abandon it mid-voyage. If that’s the case, HMRC appears to be sinking because a number of its most Senior Members have departed in recent months. That well known magazine Private Eye […]
From 6 April 2017 pension scheme members will have the freedom to make withdrawals of up to £500 from their pension pots to pay for advice about withdrawing and investing their pension funds. The £500 will not be taxed on withdrawal from the pension pot, regardless of the individual’s income and the individual will be […]
The March 2015 Budget contained the announcement that “The government will legislate from April 2016 to allow people who are already receiving income from an annuity to agree with their annuity provider to assign their annuity income to a third party in exchange for a lump sum or an alternative retirement product.” This created the […]
The upper tribunal (UT) has turned down HMRC’s appeal in Vigne against the First-tier Tribunal (FTT) decision that “DIY-Plus” livery services provided to clients who stabled their horses with the late Mrs. Vigne were enough for inheritance tax (IHT) business property relief (BPR) to apply to the business. BPR applies to any business that is not wholly […]
5 April sees the end of a significant opportunity to make highly worthwhile pension savings by taking advantage of: • the doubled annual allowance for 2015/16; and • unused allowances brought forward from the years 2012/13, 2013,14 and 2014/15. 2015/16 annual allowance This year was split between two pension input periods (PIPs); the first of which ran […]
A raft of changes have been made to the rules around pension flexibility to ensure people who are seriously ill and the young are able to access their pension and are not unfairly penalised with large tax bills. The Budget has announced rule changes to remedy anomalies and injustices created unintentionally by pensions freedom. The […]
Finance Act 1986 (FA 1986) s 102 treats property that an individual has given away as remaining in the donor’s estate for IHT purposes if · (s 102 (1)(a)) possession and enjoyment of the property is not bona fide assumed by the donee at or before the beginning of the relevant period (the seven years […]
Here we summarise some of the less prominent draft clauses for the 2016 finance Bill. These may have been announced before or represent little change in practice but they are all important because they all affect someone. Capital Gains Tax: disposals of UK residential property by non-residents These clauses: include non-residents’ CGT (NRCGT) in the scope […]
Following lots of discussion and debate in recent years regarding the reform of inheritance tax (IHT), only a couple of minor points arose in the autumn statement. First, following a number of changes over recent years extending the exemption from IHT for members of the armed forces whose death is caused or hastened by injury […]
On 16 July 2015 HMRC published draft Regulations containing the proposed IHT hallmarks for DOTAS ( Disclosure of Tax Avoidance Schemes) purposes. These have attracted attention and criticism because of the breadth of their potential application. Consequences of arrangements being reportable to HMRC under DOTAS may include HMRC issuing accelerated payment notices to users of […]
New rules are being introduced to align pension input periods (PIPs) with the tax year by April 2016. The transitional rules to enable this effectively mean that 2015/16 is being split into two, potentially allowing high earners an additional opportunity to augment their pension funding now. The first new PIP will be from 9 July 2015 […]
Pensions were once again prominent in the Budget with news that the Annual Allowance will undergo yet another revamp and that the future of pensions tax relief will come under the spotlight in a Government Green Paper. From April 2016 the government will introduce a taper to the Annual Allowance for those with adjusted annual […]
From 5 April 2017 there will be a new £175,000 allowance on homes left to children and grandchildren. At the same time the Chancellor confirmed that the current nil rate band of £325,000 will be fixed until 2020/21. Both allowances can be transferred to a spouse or civil partner with the result that £1 million […]
The pre-owned assets tax (POAT) was ten years old on 6 April 2015 but no party was held because nobody would have attended. Introduced as a countermeasure against inheritance tax avoidance schemes, POAT applies to anyone who disposed of an asset after 17 March 1986 who subsequently occupies or enjoys the use of that property […]
HMRC has designated the market operated by The Channel Islands Securities Exchange Authority Limited as a recognised stock exchange under Section 1005 (1) (b) Income Tax Act 2007 with effect from 20 December 2013. Therefore as from 20 December 2013 all securities admitted to trading and listed on this market are: ‘listed’ for income tax […]
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