While always ensuring we remain non-partisan, as tax advice is such a large part of our business here at Wilkins Kennedy, we have been watching the general election countdown with interest, taking particular note of the tax promises made on both sides of the house.
The possibility of a change in Government can make some clients understandably nervous, but ballot boxes are not necessarily anathema to those who are looking to take advantage of existing tax-favoured reliefs in the short to medium term. Instead, take some sage advice on the best ways to spend these twelve days before a pre-Christmas election.
While election day is 12th December, the winner may not be crowned for days, or even weeks afterwards, meaning it is highly unlikely any tax changes floated by the main parties will take effect from election day. It is far more likely that this any changes will be applied from the date of a new Budget, or possibly the start of the 2020/21 tax year on 6th April 2020. Given previous seasonal recess periods have lasted until 8th or 9th January, it would be a Christmas miracle if a Budget could be convened before January, so the chances are that no matter how eager the Chancellor, a new Budget is not likely to be scheduled sooner than late January 2020.
Although changes are unlikely before January 2020, those in the process of completing a transaction may be best served by making sure all the finer points are resolved as soon as possible. That said, don’t agree to a poor deal just to cross the finish line in case of tax changes; the old adage of ensuring the tax tail does not wag the deal dog is very much in point here.
Those feeling certain of a change of Government, and one that may have a detrimental impact on a business sale, for example, could consider taking steps now to protect the existing tax position in advance of the final sale date. This could include taking action to preserve a 10% rate of tax under the entrepreneurs’ relief provisions, although we would advise clients to consider this very carefully. Such planning is rarely risk-free and could have potential unforeseen future impacts. If you would like to discuss the options further, please contact your local Wilkins Kennedy tax specialist.
While removal of tax benefits has not featured highly in any of the main parties’ manifesto promises, inheritance tax (IHT) reliefs are a currently hot topic, and the recent Office for Tax Simplification report suggested some sweeping changes could be coming soon. Those thinking of gifting assets that might qualify for Agricultural Property Relief (APR) or Business Property Relief (BPR), or both, might prefer to take action sooner rather than later in case of future legislative changes, whomever is in the driving seat.
Other generous tax reliefs, such as Research and Development tax credits, are another area in which a new Government could make tax savings. Here, claims can be made directly after the accounting period ends, and you then have a 24 month period before the claim is out of time. If you make a claim early, your relief should be protected if the relief is reduced. If, instead, the tax benefits become more generous, you can always submit a revised return within the claim period to benefit from the uplift.
Finally, such a period of reflection offers an ideal opportunity to review any family businesses or interests in light of any possible changes and revisit remuneration and/or dividend policies with an eye on wealth planning for the future. Again, your local Wilkins Kennedy tax specialist would be happy to help.
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