The annual exemption for 2007/08 is £9,200. For most trusts the exempt limit is increased to £4,600.
For individuals capital gains continue to be treated as the top slice of income. For 2007/08 rates continue to be aligned with those applying to savings income. Tapered gains are charged at 10% where gains plus taxable income do not exceed £2,230; 20% between £2,231 and £34,600; and 40% on any balance.
For trustees the rate of CGT is 40%.
The IHT nil rate band is increased to £300,000 with effect from 6 April 2007. The Chancellor previously announced that the band will rise to £312,000 in 2008 and £325,000 in 2009.
| Comment Once again it is disappointing that little attempt was made to increase the nil rate band to reflect the steady rise in the housing market. The family home remains the main asset in many estates and some IHT planning should be considered if the value of the estate exceeds the nil rate band. |
The PGS has been the subject of consultation since 2004 and is now expected to be introduced where planning permission is granted after 31 March 2009. The following principles have been established:
| Comment The PGS is designed to encourage landowners to release land for development, although how a tax on this action will achieve this aim remains to be seen. Landowners and developers need to consider the impact of the PGS on proposed developments that may not commence until after 31 March 2009. |
In 2006 specific rules were introduced to target ‘contrived’ capital losses created by companies. A loss accruing to a company is not an allowable loss if it arises as part of arrangements which have a tax advantage as their main purpose or one of the main purposes.
HMRC have become concerned that persons other than companies were involved in the creation of ‘contrived’ capital losses to secure a tax advantage. Therefore for capital losses arising on disposals on or after 6 December 2006 the anti-avoidance rule for companies is extended to all persons liable to CGT including individuals, trustees and personal representatives.
A capital loss will still be available if it arises from ‘genuine commercial transactions’.
| Comment The draft legislation is wide ranging and there is concern as to how HMRC are going to apply the legislation in practice. |
Individuals often purchase a property abroad by setting up a company to own the property. This is done for a variety of reasons related to the tax or inheritance laws of the country in which the asset is situated. Where the individuals direct the company’s affairs (whether through an agent or not) they could be assessed on an employment income benefit in kind charge as a director of the company. Legislation will remove that tax charge where certain qualifying conditions are satisfied:
The legislation will not be enacted until 2008 but HMRC will not seek to tax anyone in the intervening period provided the qualifying conditions are satisfied.
Where an individual benefits from assets that are subject to the pre-owned assets income tax charge, they can elect for those assets to be treated as forming part of their estate for IHT purposes. For individuals who are liable from 2005/06 (the first year of charge), the deadline was 31 January 2007. The Finance Bill will include legislation to allow HMRC to accept late elections. This may apply to any late elections for the 2005/06 tax year.
If individuals exchange property SDLT is charged by reference to the market value of the property acquired by each party. However if the parties are ‘connected persons’, for example husband and wife or brother and sister, the market values are aggregated and the rate of SDLT is that applicable to the aggregate value. This may mean that a higher rate of tax applies.
The Finance Bill will provide that the two legs of an exchange will not be linked and will apply to exchanges on or after the date of Royal Assent.
A new relief will be introduced for buyers of new zero carbon homes from 1 October 2007. Relief will not be available on existing homes. The relief will be:
A property will qualify if there are zero carbon emissions from all energy use in the home over a year. To achieve this, the fabric of the home will be required to reach a very high energy efficient standard and to be able to provide onsite renewable heat and power.
The relief will not be available beyond 30 September 2012.
| Comment Homes will not be required to be zero carbon at all times but the import of grid power and export of renewable power should at least balance over the course of a year. |