Financial Health Warning

Wealth management practitioners must take note of new case law and legislation, some of which may give rise to difficulties in practice, says Victoria Mahon de Palacios

George Osborne delivered his final Budget of the parliament on 18 March 2015. As in previous years, the Autumn Statement gave us a pre-warning of much of its content, and the revisions to the stamp duty land tax charging structure, increases in the remittance basis charge (RBC), and increases to the annual tax on enveloped dwelling (ATED) charges were all confirmed. However, there were a few surprise announcements.

The use of deeds of variation for tax purposes is to be reviewed. Deeds of variation allow a redirected inheritance to be subject to inheritance tax (IHT) and capital gains tax (CGT) as if it had been a gift made by the will. The announcement follows publicity around families of high-profile politicians using deeds of variation to secure IHT relief. The results of the review are expected in the autumn.

Another unexpected announcement was the restriction of the CGT 'wasting assets' exemption, so as to be available only if the asset disposed of has been used in the business of the person disposing of it. The restriction is designed to stop the exemption being available for assets, such as 'plant and machinery', that are used in a business not run by the disposer. This was on point in HMRC v The executors of Lord Howard of Henderskelfe (deceased) [2014] EWCA Civ 278, and meant an old master painting held at Castle Howard was accepted by the Court of Appeal as a 'wasting asset'. The restriction is now included in the Finance Act 2015 and applies to gains accruing on or after 6 April 2015.

Draft legislation was published on 10 December 2014 in connection with the simplification of the IHT relevant property regime for trusts. However, it was announced in the Budget 2015 that these rules would not be included in the Finance Act 2015 but carried over to a future Finance Bill, depending on the election result. We could hear more in the second Budget of the year, which is scheduled for 8 July 2015.

Finance Act 2015

The Finance Act 2015 received royal assent on 26 March 2015, shortly before parliament's dissolution in advance of the general election. Key provisions for wealth management practitioners include the following:

The ATED rate bands are lowered so as to apply, for the first time, to relevant properties worth in excess of £1m. Previously, the threshold was £2m...