The Budget | 2018 - Inheritance & Property Tax

IHT changes to nil rate band

In relation to deaths occurring on or after 29 October 2018, two technical amendments are to be made to the operation of the residence nil rate band.

The first amendment relates to the calculation of the ‘lost relievable amount’ where a claim for the downsizing addition is made. It ensures that the value of any part of a residence that is inherited by an exempt beneficiary is taken into account in determining the lost relievable amount.

The second amendment treats property included in a person’s estate by the operation of the reservation of benefit rules as being inherited by a direct descendant if it became comprised in the direct descendant’s estate as a result of the original gift.


Consultation on the taxation of trusts

As announced at Autumn Budget 2017, the government will publish a consultation on the taxation of trusts, intended to make it simpler, fairer and more transparent.

Trusts settlements definition

Legislation will be included in Finance Bill 2019-20 to confirm the IHT position in relation to additions to settlements made by an individual whilst non-UK domiciled. Where additions are made to such a settlement when the individual has become UK domiciled (or is deemed to be UK domiciled), those additions will not be excluded property. This will apply to all occasions of charge arising on or after the date of Royal Assent to Finance Bill 2019-20, irrespective of the date of the addition. Further legislation will also provide for the treatment of transfers between trusts made after the date of Royal Assent.

Changes to taxing gains made by non-residents on UK immovable property

As announced at Autumn Budget 2017, from 6 April 2019 all non-UK residents who dispose of interests in UK land will be brought within the scope of either capital gains tax or corporation tax, as appropriate, and a further rule will also tax indirect disposals of UK land where a person disposes of an entity that derives 75 per cent or more of its gross asset value from UK land.

Draft legislation was published on 6 July 2018 and there was then a period of technical consultation, during which HMRC and HM Treasury worked with industry on provisions applying specifically to collective investment vehicles investing in UK land. It has now been announced that Collective investment schemes and Alternative Investment Funds (other than partnerships) will be treated as if they were companies chargeable to corporation tax and an investment in the fund will be treated as if the interests of investors were shares in a company, with the consequence that if the fund is UK property rich, a disposal of an interest in it by a non-UK resident will fall within the new provisions. UK Real Estate Investment Trusts will be exempted in relation to gains on disposals of UK property rich entities under the same mechanism as disposals of property under existing CTA 2010, s. 535.

Shared occupancy test for rent-a-room relief

Following consultation on the draft legislation published on 6 July 2018, the legislation for the shared occupancy test for rent-a-room relief will not now be included in Finance Bill 2018-19.

Business rates

In order to provide upfront support to high street businesses, business rates will be cut by one third for retail properties with a rateable value below £51,000, benefiting up to 90 per cent of retail properties. This will apply for two years from April 2019, subject to state aid limits.

Stamp duty land tax

For details of the proposed stamp duty land tax changes, see the section Stamp taxes and ATED.

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Article Written by Stephanie Webber

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