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Tax changes you may have missed

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Tuesday June 4, 2013 at 10:00am
There are so many changes to tax rules and limits around the start of the new tax year you might be forgiven for missing some of these recent subtle changes.

SEIS CGT relief continues

In the last tax year 2012/13 it was possible to eliminate CGT on a gain if you reinvested at least the amount of the gain into an investment under the Seed Enterprise Investment Scheme (SEIS).

This valuable CGT relief has been continued into the current tax year, but with a restriction in that only half the qualifying reinvested amount can be set against the chargeable gains. It is therefore never possible to shelter more than half of the gain via an SEIS reinvestment.

What this means is that with SEIS relief at 50% and CGT reinvestment relief available on half of the gain, the total tax relief on offer is 64%. Well worth considering!

New rules for sleeping partners

HMRC have suddenly announced that they now consider that Sleeping and Inactive Limited Partners are liable to pay Class 2 NICs as self-employed earners and Class 4 NICs in respect of their taxable profits.

Sleeping or Inactive Limited Partners who have not paid Class 2 or Class 4 NICs for a previous period will not be required to ‘back-pay’ them but they will be expected to do so from now on.

You may be able to still avoid NICs by seeking exemption due to small levels of earnings, or going for deferment in certain circumstances. There may also be a legal argument to use against HMRC and we will certainly be keeping up to date on any developments.

IHT exemptions – good news for expats

If you or your spouse/civil partner are non-domiciled in the UK you may have been aware that the normal inheritance tax (IHT) exemption of an unlimited amount for transfers between you (lifetime gifts and on death) was restricted to only £55,000.

The good news is that from 6 April 2013 the exemption was increased to the level of the nil rate band of £325,000 and will in future increase in line with the nil rate band.

Where this is still an issue it will be possible for the recipient to elect to be treated as UK domiciled, so that all transfers from their spouse or civil partner will be exempt transfers. It will however bring all overseas assets into the IHT fold. The election only applies for this IHT treatment, and can be made at any time after marriage or registration of the civil partnership. It can apply from a chosen date from 6 April 2013 but going back no further than 7 years.

An election after a death from 6 April 2013 will be valid if made within 2 years or such longer period as HMRC may allow. This will provide plenty of flexibility, especially on a death, and with careful planning the overall IHT burden can be minimised.

Andy Parker
Chartered Accountant Birmingham

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Parker Chartered Accountants and Financial Advisors is the trading name for PLW Advisors Ltd (Registered No. 10396831), and Parker Financial Planning LLP (Registered No. OC347027). Parker Financial Planning LLP is authorised and regulated by the Financial Conduct Authority. All companies are registered in England and Wales – registered office contact details here