You may not have paid much attention before to what the Liberal Democrats’ policies on tax consist of but now that they’ve taken a surprise lead in the polls it’s worth knowing exactly what they have proposed and how it might affect you. If a hung parliament is the outcome of the upcoming general election then the Lib Dems’ manifesto will be all the more significant.
Frustrated by the new 50 per cent income tax rate slapped on high-earners, accountants are encouraging clients to avoid paying it.
Here are two suggestions for ways to duck it from advisers at Baker Tilly:
Make full use of non-pension reliefs
In the last Weekly Tax Brief, we looked at pensions. Investing in other tax-efficient vehicles such as Enterprise Investment Scheme or Venture Capital Trust shares or Individual Savings Accounts should also be considered.
Each year, up to £200,000 could be invested into a VCT gaining tax relief at 30%. EIS investment of up to £500,000 gives relief at 20% and, additionally, with capital gains tax deferral there is the prospect of 38% relief or 60% relief where the gain arose before 6 April 2008.
Remember that while those investments may bring tax advantages, they also carry inherent investment risks and independent financial advice is always needed.
Consider when to claim losses
Losses on subscriber shares in EIS-qualified companies can be claimed against income tax but qualifying shareholders should not always rush to claim their losses. If a loss has arisen but not been claimed yet, there is no requirement that the loss must be claimed now: the claim may be made in 2010/11, so providing relief at the top rate of tax, including the 50% additional rate where that applies.
Yesterday’s Court of Appeal ruling in the Gaines-Cooper case has sent expats into a panic over the potential hidden tax liabilities that many of them might now have.
The Court ruled that Mr Gaines-Cooper along with two other businessmen were all still liable to tax in the UK, despite living abroad in Mr Gaines-Cooper’s case for over 30 years and not coming back for more than 90 days a year.
The argument was that he hadn’t shown ‘a distinct break’ from the UK and that the ’centre of gravity of his life and interests’ remained here. Worryingly, there is no limit to the amount of tax that can be claimed back and in his case it could be as high as £30m.