A suite of key property-related clauses – including on non-domicile rules and inheritance tax changes – have been dropped from the Finance Bill 2017 in a bid to rush it through the Commons before the snap General Election.
The government’s allowing just four hours of debate to get the Bill through the House of Commons before Parliament business is put on hold until June, prompting many of the more significant proposals to be parked in order to get the rest signed-off. “It is unbelievable that such important provisions have been dropped at the eleventh hour,” says tax advisory firm Blick Rothenberg, and leaves many tax-payers “in limbo”.
Cut elements include long-awaited changes to the UK’s non-domicile rules, changes to inheritance tax relating to UK residential properties, and “making tax digital”. They’re being held back in order to rush through other bits of the Bill, which enact measures announced in Chancellor Hammond’s Spring Budget, as well as other priority business.
It is expected that a second Finance Bill will be published after the election and the majority of the dropped changes will be re-introduced and backdated to have effect from 6th April 2017.
“We worked hard with clients and their advisors to ensure that the 6 April 2017 planning deadline was met, and that their affairs were in order,” said top law firm Mishcon de Reya in a briefing to clients. “However, in a very surprising and unprecedented move, the Government has just announced it is dropping those sections of the Finance Bill that were going to introduce these changes. Whilst it is likely that the dropped proposals will return after the UK general election on 8 June, for the time being the UK government is not introducing changes to:
- Treat non-domiciled individuals as UK domiciled for all tax purposes once they have been UK resident for 15 out of the previous 20 tax years;
- Bring all UK residential property (including certain loans to fund their purchase and assets used as security for those loans) within the scope of UK inheritance tax; or
- Change the way they tax offshore trusts.”
Nimesh Shah, partner at Blick Rothenberg: “It is unbelievable that such important provisions have been dropped at the eleventh hour, after the painful amount of work that has gone into the process to finalise the legislation. It is even more disappointing for those non-domiciled individuals who were readying themselves for the changes and arranging their affairs in the run-up to the end of the (5th April 2017) tax year.
“The Government should be taking their time with such important tax legislation and it would have made sense to leave this until after the election. To rush it through in this slapdash way before the election is unsettling for taxpayers.
“Non-domiciled individuals will now face a period of limbo, waiting for the outcome of the election and publication of the second Finance Bill. This will be the second time in three years that we will have two Finance Acts in a year, adding to yet more tax legislation.
“Moves like this create unstable and complex tax policy, and the Government needs to put politics to one side in the interest of certainty for taxpayers.”