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Slimming down for summer 

Teresa May’s announcement of a snap general election in June quickly resulted in a slimming down of the 2017 Finance Bill (now enacted as the Finance Act 2017). Julia Peake at Sanlam UK discusses what’s in, what’s out, and why, as advisers, you need to keep your wits about you.

Numerous clauses of the 2017 Finance Bill were dropped in an effort to get it passed before Parliament was dissolved in preparation for the general election. You and your clients may have been left confused, having to put much of your planning on pause, with no clarity as to if or when the original proposals may be re-introduced. So what changed, and how can you prepare your clients in the wake of this uncertainty?
 

What has stayed?

Some clauses remained, and have been implemented in the Finance Act 2017:

  • Tax rates and allowances for 2017/18 which came into force on 6 April 2017.
  • Provisions relating to transfers to overseas pension schemes and the tax charges applicable, which came in from 9 March 2017.
  • 12% insurance premium tax which will come into force from 1 June 2017.
  • New rules relating to salary sacrifice which came into force on 6 April 2017.
  • Gross payment of interest distributions by Investment Trusts, Authorised Unit Trusts and OEICs.
 

What was removed?


The key clauses that were omitted include:
  • The reduction of the Money Purchase Annual Allowance (MPPA) from £10,000 to £4,000.
  • The reduction of the dividend allowance from £5,000 to £2,000 from tax year 2018/19.
  • Legislation to implement the “Making Tax Digital” initiative.
  • The ability for those who create disproportionate gains on investment bonds to have their tax bill reassessed on a just and reasonable basis.
  • The new trading and property income allowances of £1,000.
  • Rules relating to the deemed domicile limit for non-domiciled individuals changing from 17 out of 20 years, to 15 out of 20 years.
  • The income tax exemption for up to £500 employer funded pensions’ advice.
  • The new rules on corporate loss relief, and restricting deductions for corporate interest expense.

 
Further information on the Finance Bill 2017

 

How can you prepare for the future?

The Conservative Party has been clear that should they be re-elected these clauses will come into force in the near future. House of Commons Financial Secretary for HM Treasury, Jane Ellison MP said “These provisions will make a significant contribution to the public finances, and the government will legislate for the remaining provisions at the earliest opportunity, at the start of the new parliament.”
 
While these clauses have not come into force as yet, you should be aware when giving recommendations that they could return in the future. The next question to consider is whether any of these clauses will be retrospective to their original planned implementation date?  We have seen examples in the past when this has been the case, so it’s not beyond the realms of possibility.
 
The outcome of the general election, the pledges made and essentially who will lead the next government will be key factors in the implementation of these clauses and the dates they will take effect from. If the Conservatives return to power, you could expect the above omitted clauses to become law in the near future – some (if not all) with retrospective effect. If there is a change in government, or even a coalition, any future implementation of the clauses will be less clear.
 

What next?

As you know, every recommendation given to your clients’ needs to fit that individual’s circumstances at that particular time. With this uncertainty, the best you can do is speak with your clients, discuss their individual circumstances and make recommendations which will be specific to their financial aims, goals and level of risk, ensuring they understand how any legislation changes could affect them now, and in the months to come.
 
We hope this has given you some food for thought and if you wish to discuss the content of this article please contact our technical team.


A PDF version of this article is available.
 

This note is to be used by Financial Advisers only. It is not intended for onward transmission to a private customer and should not be relied upon by any other person. Sanlam accepts no liability for any action taken or not taken by an individual or firm as a result of the contents of this material. The tax treatments and information contained in this document are based on current tax law and HMRC practice as at May 2017 and may be subject to change in the future. Whilst we have made every effort to ensure the accuracy of this material, we cannot accept responsibility for any consequence (financial or otherwise) arising from relying on it. This document is for information purposes only and should not be treated as advice and independent taxation advice should always be sought.

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