Draft Finance Bill 2013: Delay in issuing legislation on new capital gains tax will cause many problems, says Ernst & Young
Patrick Stevens, tax partner at Ernst & Young comments on today’s draft finance bill:
“While much draft legislation for Finance Bill 2013 is being released today, draft legislation on the new capital gains tax to apply to offshore entities is conspicuous by its absence.
“With effect from April 2013, companies and other “non-natural” persons that are not resident in the UK will be subject to capital gains tax on disposals of UK residential property valued at over £2 million. However, draft legislation giving details of how the new charge will operate has been delayed and will not be published until January.
“Many non-resident individuals who hold UK property through an offshore company for a variety of reasons (for example, to avoid forced heirship rules in their home country) may find themselves subject to capital gains tax in the UK for the first time. Some people may feel it is unreasonable to introduce a new tax and to give no time to restructure property holdings without incurring the tax. Furthermore, a delay in issuing legislation gives less time for proper scrutiny before implementation.
“It appears as though trustees have been removed from the new tax, which will be greeted with a sigh of relief by many – since the existing rules designed to tax non-resident trusts are among the most complex on the statute book. However, even trustees cannot fully relax until full details of the new legislation have been published.
“Difficulties in drafting the legislation may well stem from what has appeared to be a degree of confusion throughout the consultation period about the aim of the new charge and which entities the new capital gains tax should target.”