Here at Baldwins we have been watching the election build-up with interest, particularly the tax pledges made on both sides of the house.
While we can’t predict the future, we do appreciate that the possibility of a change in Government can make some clients nervous, especially those who are looking to take advantage of existing tax-favoured reliefs in the short to medium term. So what advice can we give you in a not-altogether-festive run up to the 12th December election?
1. Don’t panic
Although the election is scheduled for the 12th December, we certainly won’t find out who’s won until the 13th, and if the results are as divided as the country has been, it could be some significant time after that. While election promises on tax have been floated, it is unlikely any changes will take effect from election day, and far more likely that this will be on the date of a new Budget, or even the start of the new tax year on 6th April 2020. Given the holiday season, it would be a Christmas miracle if a Budget could be convened before January, and previous seasonal recess periods have lasted until 8th or 9th January, so the smart money would predict a new Budget no earlier than late January 2020.
2. Good to go
While it is unlikely that anything untoward will happen before January 2020, if you are in the process of completing a transaction, making sure all the finer points are tied up as soon as possible is likely to work in your favour. That said, the old adage of ensuring the tax tail does not wag the deal dog is very relevant; don’t agree to a poor deal just to get the deal through in case of tax changes.
If you are convinced a change of Government is almost certain and that this may have a significant impact on a business sale, for example, you could consider taking steps now to protect your tax position in advance of the final sale date. This could include taking steps to preserve entrepreneur’s relief to benefit from a 10% rate of tax. We would counsel caution, however, as this is not risk-free and could have potential unforeseen future impacts.
If you would like to discuss the options further, please contact your local Baldwins tax specialist.
3. Be an early bird
Although none of the main parties have specifically referred to removing individual tax reliefs, inheritance tax (IHT) reliefs are a hot topic, and the recent Office for Tax Simplification report suggested some wide-reaching changes. If you are thinking of gifting assets that might qualify for Agricultural Property Relief (APR) or Business Property Relief (BPR), or both, it might be wise to do this sooner rather than later in case of future legislative changes, whomever is in the driving seat.
Research and Development tax reliefs are another area where a new Government could look to make tax savings. Claims can be made as soon as the accounting period ends, and you then have a 24 month period before the claim is out of time. If you are worried the relief will be curtailed, if you make a claim early, your relief should be protected. If the rates increase, you can always submit a revised return within the claim period to benefit from the uplift.
Finally, why not take this as an opportunity to look at any family businesses or interests in the round in light of any possible changes and review remuneration and/or dividend policies with an eye on wealth planning for the future? Again, your local Baldwins tax specialist would be happy to help.