Julia Rosenbloom, tax partner at Smith & Williamson, is calling on the government to bring about changes in the upcoming Budget that would see greater wealth transfer to younger generations, and a series of temporary tax reliefs that would provide a much needed boost to struggling areas of our economy.
Personal taxes
1. Extend the Stamp Duty Land Tax holiday to support first-time buyers
- Many prospective first-time buyers are – and continue to be – constricted by the mortgage market, with very few high LTV products available on the market. We would argue that there is still a lot of pent up buying potential in the housing sector, particularly with lockdown measures enabling prospective buyers to increase their savings for a deposit. All FTBs should be able to enjoy a SDLT holiday of some form for an extended period as we start to emerge out of the worst of the pandemic and more 90% LTV products become available.
- We believe the SDLT holiday should be extended past the 31st March to the end of 2021. Thereafter, SDLT should be tapered back throughout 2022 to ensure a smooth transition back to pre-Covid rates.
2. Scrap APPG’s proposals on BPR and APR
- The Chancellor should reject the APPG’s proposal to scrap Agricultural Property Relief (APR) and Business Property Relief (BPR) when weighing up his options for tax rises. Removing these reliefs would mean many would face large inheritance tax charges when passing on farms and businesses to loved ones, which could result in unwanted sales of farms or businesses or place other financial pressures on those enterprises – at a time when they need all the help they can get.
3. Provide better support for residential landlords
- Residential landlords are facing increasing tighter rental yields, with a rise in tenants being unable to pay rent or a proportion of their rent. The Government should look to introduce a ‘loss of rent/revenue’ structure, backdated to March 2020, to enable landlords to claim relief for loss of rental income during the pandemic against either future gains or future rental income.
- These measures would encourage landlords to continue to weather the financial struggles they are facing, rather than selling up and potentially leaving tenants having to seek alternative places to live.
4. Temporarily relax the seven-year potentially exempt transfers (PETs) rule to help close the intergenerational wealth gap
- The timespan for potentially exempt transfers should be reduced temporarily from seven years to 12 months to encourage grandparents and parents to pass wealth on to the younger generation, who have been financially impacted by the pandemic.
- The seven-year rule is arbitrary, with no consideration for any unexpected life events. Reducing the timeframe will encourage people to gift more frequently, with less risk of an unexpected tax liability.
Business tax
1. Support landlords with empty commercial premises
- Remote working is here to stay. For years businesses have flirted with the concept, but its necessity in the wake of Covid-19 supercharged the trend. In response we are seeing landlords having to contend with a growing number of empty commercial properties.
- The Government should signal its support for commercial landlords during this time of flux by working with lenders to extend payment holidays and ensure debt repayments are fair and manageable for those facing hardships.
2. Shield sectors that have suffered most from any corporation tax rises such as hospitality
- Aside from the ‘Eat Out to Help Out’ scheme in the summer, there has been little good news for the hospitality sector. The VAT cut was welcome, but this is little comfort for businesses with a strong ‘bricks and mortar’ presence who are unable to attract punters.
- We do not consider that now is the time to put up Corporation Tax rates for anyone but, if the speculated rise does happen, we would urge the Chancellor to apply special treatment to sectors which have suffered especially. Rates for the hospitality sector should be at the very least maintained at 19% for the remainder of 2021 and for 2022. This would allow areas of the UK that are skewered towards hospitality to recover over the busy summer and winter periods – most notably our coastal regions.
3. Shield rises in CGT on profits made from investing in British businesses, or smaller businesses
- To support British business emerging out of the impacts of Covid-19, and the teething problems of Brexit, we need to encourage greater investment into UK companies. Shielding or cutting the rate of CGT investors pay on profits made by such companies is a quick and easy tax-led solution to encourage this investment.
- We would advise implementing this throughout 2021 and 2022. It could be realised through changes to current VCT, EIS and SEISS investment vehicles but also through a newly created investment vehicle that is more accessible to a wider range of investors.
DISCLAIMER
By necessity, this briefing can only provide a short overview and it is essential to seek professional advice before applying the contents of this article. This briefing does not constitute advice nor a recommendation relating to the acquisition or disposal of investments. No responsibility can be taken for any loss arising from action taken or refrained from on the basis of this publication. Details correct at time of writing.
Issued by Smith & Williamson LLP, part of the Tilney Smith & Williamson group of companies (the “Group”) which comprises Tilney Smith & Williamson Limited and any subsidiary of Tilney Smith & Williamson Limited from time to time. Further details about the Group are available at www.tsandw.com/compliance/registered-details.
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