Q. I am the owner/manager of a small local business. Despite what we see in the national press, trading conditions remain extremely difficult for many people in my position. Was there any good news for small business owners in the recent autumn statement?
A. Yes. Although there were no dramatic gestures (which would have been a surprise given both the short-term and medium-term economic outlook), the Chancellor, George Osborne, announced some measures intended to help businesses of all sizes.
First, the Chancellor announced that future increases to business rates will be capped at 2%. He extended the business rate relief scheme from 2014 also, meaning that a business in premises with a rateable value of up to £50,000 will benefit from a business rate discount equivalent to £1,000.
In addition, the Chancellor announced the introduction of a new “reoccupation relief”. This will halve the business rates for those setting up in vacant shops on the UK’s high street, a measure intended to reduce the rates of non-occupancy and to improve both the appearance and fortunes of the UK’s towns and cities.
Q. I was expecting the Chancellor to announce, during his autumn statement, that Child Trust Funds could be transferred to Junior ISAs. However, I have not seen this reported in the press. Have I missed it?
A. No.
In his Budget in April, the Chancellor, George Osborne, announced a consultation that would consider tax-efficient savings for minors and, in particular, the discrepancies between Child Trust Funds (“CTFs”) and Junior ISAs and whether those holding CTFs were at a disadvantage.
It was anticipated that the Chancellor would announce the results of that consultation during his autumn statement and, in particular, he would announce that CTFs could be transferred/converted into Junior ISAs (thus enabling account holders to benefit from what are perceived to be more competitive savings vehicles).
Whilst this may be disappointing news for you, it is not unthinkable that the Chancellor will report on that consultation – and permit the transfer of CTFs to Junior ISAs – when he delivers his next budget in April.
Q. I read with interest your answer to last week’s question regarding the extension of the capital gains tax regime to the sale of UK properties by foreign nationals. You stated that UK nationals selling a property that is not their main residence are subject to capital gains tax. I am in the process of selling a holiday home, that I purchased several years ago. A friend has suggested that I can mitigate my liability to capital gains tax, although she suggested that the Chancellor reduced the attractiveness of this option in his recent autumn statement. Can you offer any assistance, please?
A. Yes. You are correct that a UK resident selling a property that is not their main home will be liable to capital gains tax (“CGT”) on any profit made (subject to the annual allowances and allowable deductions, such as for improvements).
I suspect that your friend is referring to “private residence relief”, which enables a person to mitigate a liability to CGT upon the sale of a residence that is not their main home, provided that it has been their “principal private residence” at some point during the period of ownership.
Private residence relief hit the headlines a few years ago, when a number of MPs exploited the relief, using a process known as “flipping”, so that both their constituency home and their London residence were, over a period of time, regarded as their principal private residence.
At present, private residence relief relieves the final 36 months of ownership of a property for the purposes of CGT. In Treasury documents published following the Chancellor’s autumn statement, it was announced that the scope of private residence relief will be reduced to the final 18 months of ownership. It was stated that the government’s intention was to “reduce the incentive for those with multiple homes to exploit the rules”.
If the holiday home to which you refer has never being your principal private residence, the reduction to the relief will be of no consequence (as it is not available to you).
However, if the property has, at some point, been your principal private residence, then the reduction to the scope of private residence relief, which takes effect in April 2014, may affect you (depending upon when the sale of your property completes). If you require any further assistance, I recommend that you seek advice from a chartered financial planner.
If you have a question you would like Trevor to answer, please email it to: yourmoney@rwpfg.co.uk or post it to Your Money, Rutherford Wilkinson Ltd, Northumbria House, 21-23 Brenkley Way, Blezard Business Park, Newcastle upon Tyne, NE13 6DS.
0191 217 3340
