Who can advise on tax?

From whom should you seek tax advice? Should you go to an accountant, a solicitor, a banker or a financial advisor? 

I was asked this question three times this week – and would like to share with you my reply.

If the tax in question is not well understood and documented, the planning opportunities are not tried and tested and time is short, the tax payer does not have the luxury of shopping around.

Probably the highest level of UK tax education comes from the Chartered Institute of Taxation. This is the Institute which is focused exclusively on tax legislation. It has 17,000 members some of whom are Fellows and others Associates. Its members set out clearly the areas in which they specialise and these people are the undisputed experts in their field.  

I am a Fellow and am required to have indemnity insurance, comply with anti-money laundering regulations and complete the necessary set hours of training on my area of tax every year. My expert area of knowledge is on estate and succession and it is in this area that the law has been changing at an exponential rate with extremely tight deadlines.

Take the new higher rates of stamp duty land tax (SDLT) which are due to come into force in April 2016 on additional homes in the UK. The consultation paper was published on the 28th December 2015 and was closed on 1st February 2016 with results due to be announced in the Spring Budget Statement on 16th March.

For those with residential homes in offshore companies on which there is a mortgage, decisions need to be made now if the home is to avoid the higher rates of tax if the home is not their main home. However the details of this higher rate of SDLT will not be known until next month and it becomes law only weeks after. Any planning therefore needs to be started now. Of course some people say they would prefer to pay the extra tax and have certainty, but not everyone is so sanguine.

The increase in the rate of SDLT by 3% on any home in the UK which is not the main residence is expected to be as follows:

Band                        Existing        New

£0*-£125k               0%                3%

£125k-£250k           2%                5%

£250k-£925k           5%                8%

£925k-£1.5m           10%              13%

£15m+                      12%              15% 

Transactions under £40,000 do not require a ta x return to be filed with HMRC and are not subject to the higher rates.  

However, unlike capital gains tax where a home owner can elect within two years of acquiring the second home which is to be the main home, for SDLT purposes the main home is question of fact dependent upon a number of objective factors such as where the children go to school and the place of work.

Furthermore as the rules currently stand the acquisition of a second home to enable a couple to separate is not exempt from the higher rates of SDLT which is clearly not fair. Hopefully this will be picked up in the consultation.

There is also concern amongst the professionals who have to certify that the home is or is not the main residence. The professional will not know other than what he is told by the purchaser. Why the professional should be made to certify something which he cannot be expected to know independently from the purchaser.

The higher rates of SDLT are not limited to homes in which the purchaser wants to live – it extends to homes they let out – which is likely to increase the cost of renting accommodation. This may also be an area in which we may see some amendments. If not, the only way in which the higher rates can be avoided is to have more than fifteen properties available for let.

When planning, it is always the reliefs which are of most interest and SDLT is no exception. Where a property has mixed use such as an apartment which includes an office – or a doctor’s surgery, the rate of SDLT drops to a maximum of 4%. This needs careful thought not only as to whether the relief could be used, but how to ensure it is accepted.

There are a lot of advisors and many are experienced and knowledgeable about tax, but when it comes to something new, the deadline is short and the tax high – it is wise to got to the expert whose governing body is focused exclusively on tax because they are the undisputed experts.

If you would like to make a comment, find out more or arrange an appointment with Caroline please write to us on contact@garnhamfos.com or phone 020 3740 7423.