This was a very vanilla Budget (a good thing) and banks have taken the biggest hit. There is also a nod towards chipping away at the gap between tax on work vs tax on assets. Passive rental income is being squeezed which is administratively cumbersome and won’t yield huge receipts but is not particularly objectionable or polarising.
There are no changes to the residence-based FIG regime, the Temporary Repatriation Facility or the long-term residence IHT rules. The notes refer to supposedly continually assessing whether the new regime strikes the right balance between international competitiveness, fairness and support for the public finances. Hmm.
It is good to see a commitment to (following consultation) alleviating the DTR mismatch for UK based US LLC investors.
There are no CGT horrors. I have to say I am not overly clear on the impact/message of the BADR restrictions. The qualifying conditions and compliance around claiming the relief almost make it not worth it! Founders’ Relief might be the answer but that is not law yet and again the qualifying conditions look onerous. The answer I suppose is do nothing until April 2027 (when Founders’ Relief is due to come in) and hope that the business you have built is both ‘high growth’ and ‘innovative’! The policy objective is to encourage founders and early investors to start and scale companies in the UK, and after disposal, to stay and reinvest. Let’s see how that takes shape.
The Government has published its summary of responses on modernising the taxation of distributions and repayments of capital. The aim is to prevent complex arrangements that extract profits at lower tax rates, while protecting genuine commercial transactions and families passing down their business. Capital reductions, buy-backs and pre-sale reorganisations may need attention.
The trust measures are just tidying up. Easing of trust exit charges (specifically s 80) where a trust changes tax residence as a result of trustee migration is welcome as are the measures around pension fund personal representatives being able to direct scheme administrators to pay the IHT. We will wait and see what emerges in relation to the debt-deduction restrictions to settled property.
The professional bodies have been busy working with HMRC in relation to the reform of the behavioural penalties, and a consultation is promised now on the offshore regime.
The Government has announced it will legislate in Finance Bill 2027 to require taxpayers to correct inaccuracies in returns and documents given to HMRC. I thought we were all already doing this!
