Chancellor Philip Hammond gave his first (and last) Autumn Statement on 23 November. The Chancellor’s comments were delivered in the context of Office for Budget Responsibility (OBR) forecasts that have been revised down following the June referendum result but included announcements of substantial investment in infrastructure and innovation.
Also revealed were some points of particular relevance to those active in wealth management and insurance. While relatively little was said in relation to the taxation of non-domiciled clients, none of the announcements made today impact the effectiveness of UK-compliant insurance solutions from Lombard International Assurance.
The Autumn Statement confirmed that proposed changes to the taxation of non-domiciled taxpayers will be introduced, as announced, on 6 April 2017. This will include changes to the taxation of UK residential property held via offshore structures and rules to introduce a degree of protection for offshore trusts established prior to the acquisition of deemed UK domicile.
Disappointingly, for clients and practitioners looking for detail on the new rules, nothing further has been confirmed. However, as previously announced, “The Overview of Legislation in Draft, providing further information on all tax changes and updates on all tax consultations, will be published on 5 December 2016. Draft Finance Bill clauses, explanatory notes, tax information and impact notes, and responses to consultations will also be published on this date.”
Taxation of Part Surrenders and Part Assignments of Life Policies
Following the closure of the consultation on the taxation of part surrenders and part assignments on 13 July, there has been confirmation that rules will be introduced in Finance Bill 2017 to address inadvertent tax charges that can sometimes arise from these transactions. According to the documents, after 6 April 2017 it will be possible to apply to HMRC to have such a charge recalculated on a just and reasonable basis. While no comment has yet been made on the three options for change given in the consultation document, the announcement confirms that UK resident policyholders can continue to access their invested capital over time without an immediate charge to tax.
Personal Portfolio Bonds
Between August and October, the government also consulted on potential changes to the categories of property that may be selected by UK resident policyholders without their contracts becoming personal portfolio bonds.
While no commentary has been provided at this stage on the consultation proposals, Finance Bill 2017 will include a power to amend, by regulation, the categories of asset that can be made available to policyholders for selection in future.
No More Autumn Statement
The Chancellor also announced that, in future, major changes to taxation will be made only once a year and that there will be no Autumn Statement. As a result, 2017 will see two Budgets: one in spring and another in autumn. Subsequent Budgets will take place in the autumn and be followed by publication of the Finance Bill in better time before the introduction of any new rules.
From 2018, there will be a Spring Statement each year and, although the Chancellor has retained the option to make more substantial changes at those events if circumstances require, Spring Statements will focus on the government’s response to OBR forecasts and the publication of consultations.
For those who had become used to the Autumn Statement taking the form of a second Budget at which widespread changes are announced, this was a quieter event. Much needed detail on the upcoming changes to non-domiciled taxation is still outstanding. However, the timetable is reconfirmed and we expect further information from 5 December. As regards life policies, the substantial advantages that can be offered by a UK-compliant Lombard International Assurance contract to both domiciled and non-domiciled clients remain.
By Simon Gorbutt, Senior Wealth Planner - Regional Head
If you have any questions or require further information, please don't hesitate to contact Chris Edward or your usual Lombard International Assurance representative.