What is certain in life? Well, when it comes to taxes, what now seems certain is the ever-quickening pace of change.
The challenge for the individual and those entrepreneurs responsible for helping to drive UK economic growth is that this pace of change brings unwelcome uncertainty and complexity. This is particularly the case for the international entrepreneur, to whom a proportion of the investment and growth in business, particularly around London, can be attributed. If the changes gave rise to a simplification of our system, then one could argue we were heading in the right direction, nearly 1000 more pages of tax legislation in 2017 suggests otherwise.
As the coffers in the Treasury need filling it was not surprising that the world of real estate owners would be asked to contribute more in the way of taxes during 2017. However, one might argue they have already suffered the hammer of Stamp-Duty Land Tax (SDLT) increases in recent years, new annual taxes for certain residential property and capital gains tax for non-resident owners.
From the current state of the write downs in the valuation of many residential properties the nail seems to have been well and truly hit. Mortgage interest restrictions for landlords will be effective from 6 April 2017 along with inheritance tax exposures on death for those individuals owning residential property who may never have set foot in the UK.
Whether, in the long-term, these policies help or hinder UK PLC remains to be seen. At least a reduction in SDLT for 95 per cent of all first time buyers for properties valued up to £500,000 can be seen as a step towards helping those struggling to get on to the property ladder.
For those individuals that were regarded as ‘non-UK domiciled’ but have resided in the UK for 15 of the last 20 tax years, they must now be taxed in the same manner as any other UK resident and domiciled person. This brings those ‘long term’ residents fully within the UK tax remit whilst still seeking to incentivise internationally mobile entrepreneurs to move and set up operation for themselves and their business in the UK. With Brexit creating so much uncertainty it is important that our tax system supports entrepreneurialism in to the UK.
Shareholders should also bear in mind that from 6 April 2018 the tax free dividend allowance is being slashed from £5,000 to £2,000. In context, this could mean just over another £1,000 of tax for additional-rate taxpayers, something else for the entrepreneur and their business to think about.
The challenge remains for the Treasury to meet the financial needs of UK PLC without adversely impacting its competitiveness as a jurisdiction of choice for the internationally mobile, the world now being a truly global place to live and work. Can the Government truly quantify the loss of those successful entrepreneurs moving themselves and their business out of the UK? Or a prospective individual who would have lived and worked in the UK that now decides not to move to the UK but another jurisdiction?