Tax Services News

Pre budget speech

Property measures featured strongly in Gordon Browns December 2005 pre budget speech. One such measure was the commitment to go ahead with REITs – real estate investment trusts. Discussions have been under way for some time on this unit trust-style property investment vehicle.

Gordon Brown also announced consultations into a ‘local planning gain supplement'. The idea is to raise more tax when planning permission is granted: by capturing a proportion of the uplifted value arising on land for which planning permission has been granted. It will apply to non-residential and residential development land, but will not be implemented before 2008.

Reform to pensions

Property also featured in an announcement concerning the new pensions tax regime which comes into effect on 6 April 2006: Self Invested Personal Pensions and all other forms of self-directed pensions will be prohibited from obtaining tax advantages when investing in residential property (and certain other assets, such as fine wines, and antiques from 6 April 2006). Before this announcement, it was understood that such investments would obtain tax advantages after 6 April 2006. Investments in genuinely diverse commercial vehicles that hold residential property, (for example REITs) will most likely not be prohibited.

In another statement relating to the new pension regime, the Chancellor announced measures to prevent potential abuse of the rules for tax-free lump sums taken from pensions from 6 April 2006. The device in question was discussed in the national press in recent months and involved the reinvestment of the tax free lump sum taken from the pension fund by taxpayers over 50 years of age. Taxpayers would then reinvest the lump sum back into the pension fund, thus securing additional tax relief. The process could then be repeated on more than one occasion. The measures are intended to prevent additional tax relief being obtained in this way

Civil Partnerships

Although it was not introduced in the Pre-Budget speech, an important change came into effect on 5 December - the recognition of Civil Partnerships for tax purposes. Much has been written on this subject in the press but by way of a reminder the key tax points are: -

· Civil partners will be treated as married couples for all tax purposes e.g.
     - Gifts between partners take place at no gain no loss.
     - Partners are “connected persons” if one or both has shares in a private company.
     - Only one main residence is permitted between them.
     - Exemptions for IHT apply.

· In the UK the first formations of civil partnerships took place from 21 December.

Important information

This information is for general purposes and guidance only and does not  puport to constitute legal or professional advice.

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