When writing last month’s article, the political world was in a state of flux. I was looking forward to Sajid Javid’s Budget, an orderly Brexit and everything being rosy. At the time of writing, the Labour party has just published its manifesto and the Conservative manifesto is due to be published over the weekend.
We’ve been drip-fed policies by all parties and, as far as I can see, it looks like they’re all promising to spend, spend, spend! Mainly this is funded by borrowing and increased taxation. Let’s hope that they don’t bankrupt the country, because then nobody wins!
I also think that a major issue for the electorate is Brexit. It seems that even Remainers want to support Brexit on the basis that firstly, they’re in favour of the rule of democracy, and secondly, further prevarication and delay can only be bad for business, in particular.
Whilst high earners would seem an easy target for increased taxation, any government needs to be careful that they don’t kill the goose that lays the golden egg, by overtaxing it. Evidence suggests that higher levels of tax are gradually driving ‘non-doms’ out of the country. Inevitably, other sectors of high earners will look at ways of avoiding high rates of tax if they feel they’re being unfairly treated.
Some commentators have implied that tax experts are exploiting a loophole; costing the treasury £2 billion a year. Surprisingly, this is not some obscure tax scheme but Entrepreneurs’ Relief (ER). It’s suggested that ER is far too generous a relief, available when selling a business or retiring. It’s been advocated that some sort of tax holiday, for the first year of a new business, would be a better use of that money. I’ve no doubt that any incoming government will look at this issue in due course.
Despite the recent months of turmoil in government, HMRC continue to target enquiries on overseas interests. HMRC have access to data from more than 100 foreign tax authorities. Information requests totalled 540 last year, an increase of 24%.
Another area that HMRC are investigating is inheritance tax, and this is another area of tax that could well be targeted by our next Government. The area that they’re looking at is potential undervaluation of a property. It’s become easier for HMRC to check and compare values of similar properties against the Land Registry database. They can also use Google ‘Street View’ to check for extensions or other improvements that may have increased the property’s value.
This missive is a bit shorter than normal, but expect a bumper edition next month, when we’ll know what colour our new Government is and, hopefully, whether Brexit is happening, or not!
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