If you have a holiday home in Europe, a family trust, or are reliant on UK tax reliefs which extend beyond the UK, then Brexit may have an impact.
Your holiday home in Europe
If you own a holiday home in Europe, you may wish to write or amend your will before 1 November 2019. We have blogged separately on that and can be read here.
Trusts are invaluable vehicles for passing wealth on to the family. The assets held in a family trust do not belong to any family member and therefore are protected from claims by their spouses, partners, creditors etc. Trusts are also private in that they do not have to publish annual returns which are publicly available, as companies do.
There have been erosions to that privacy via EU cooperation on tax transparency. This means that trusts now have to register the personal details of the person who funded the trust, the trustees and beneficiaries, with HMRC. Trusts also have to register separately with HMRC any person connected with the trust who has a non-UK connection. This information is not available to the public, so trusts are still private. However, these obligations to report to HMRC, coupled with rules on data protection, mean that it is more difficult to include someone as a beneficiary of a trust and not reveal to them their inclusion, as they have to be asked for the information required by the tax authorities.
Although this has come out of EU cooperation, the UK has sought to gold plate these regulations and therefore tax transparency is not going to disappear after Brexit.
In order to preserve privacy, the drafting of a trust deed requires to be done more carefully and the inclusion of individuals requires more bespoke advice. These are surmountable challenges and trusts remain a preferred vehicle for many families passing on and holding wealth.
EU tax reliefs
Relief from UK inheritance tax on the value of agricultural property currently extends to properties situated in the European Economic Area (EEA). Hold over relief from capital gains tax is also allowed on agricultural property in the EEA. This was to secure compatibility with EU rules on free movement. The extension of these reliefs may be at risk after Brexit and affect your plans for succession to that property.
UK tax reliefs on a gift to charity in lifetime or on death can extend to charities situated in the EEA. Again this was to secure compatibility with EU rules on free movement. If you are minded to make a gift then you should do so now while the relief is secure.
If you are a citizen of the EEA but not a UK resident and receive UK income then you currently enjoy a UK income tax personal allowance. That relief may be at risk after Brexit, as again it is there to secure compatibility with EU rules on free movement. Bespoke advice may be required on the taxation of your income.
Brexit brings scope for changes that may impact individuals and their personal taxation and succession. Considered advice will be required. If you have any questions, please get in touch with your usual Brodies contact, or one of the individuals below.