Here is a summary of the proposed tax changes from the Labour party:
Income Tax
No increases to income tax rates.
Tax bands will remain frozen until 2028, leading to "fiscal drag" as rising wages push more people into higher tax brackets.
National Insurance Contributions (NIC)
No increase in NIC for individuals.
Capital Gains Tax (CGT)
Plans to close the private equity carried interest loophole, potentially taxing it as income instead of at 28%.
Potential restructuring of capital gains tax, including removal of some beneficial reliefs and a change in the rates at which gains are taxed at.
Potential future consultation on raising CGT rates to mirror income tax rates.
Non-Domicile Individuals
Plans to change how non-domiciled individuals are taxed on their worldwide income when resident in the UK.
Foreign assets within trusts could become liable to UK Inheritance Tax (IHT) in certain circumstances.
Inheritance Tax (IHT)
No explicit changes proposed, but options include scrapping or altering Business Property Relief, Agricultural Property Relief and potentially a reduction in the nil rate band.
Possible changes to IHT on lifetime gifts.
Any significant changes would likely be subject to consultation.
Pensions
No reintroduction of the lifetime allowance charge, but other pension tax relief changes could occur.
Potential review of IHT relief on pensions as part of wider capital tax reforms.
Past suggestions include reducing tax relief for high earners and introducing a flat rate of 33%.
Stamp Duty Land Tax (SDLT)
Proposal to increase the surcharge on overseas nationals buying UK residential property by 1%, bringing the surcharge to 3%.
As everyone waits for the proposals from the Labour government, any changes in tax legislation will surely bring out the worst in the industry. This will be a time for opportunists in the advisory market, so we wanted to give our clients and contacts a clear message on how to avoid any dodgy salesman masquerading as tax advisers.
As the old saying goes, when it looks too good to be true it probably is. Nothing screams this truth more than some dubious salesmen walking around in cheap blue suites out there selling ‘Tax Advice’. These people are usually not qualified or even have the faintest clue about tax and the laws that surround it. Tax fraud is a serious offence, and the consequences can be severe for both individuals and businesses. In recent years, there has been an alarming rise in the promotion of tax avoidance schemes that are either borderline illegal or outright fraudulent. These schemes often promise to reduce tax liabilities through intricate structures that appear legitimate on the surface but do not hold up under scrutiny from tax authorities.
We’ve all had some great tax advice from Dave from down the pub, but imagine Dave was walking around in a suit pretending to be qualified to give tax advice with a whole marketing and sales team behind him creating this illusion. No wonder people are jumping into dodgy tax schemes headfirst.
Misleading Tax Structures
One of the largest pieces of news in the tax world at the moment has been around the ‘advice’ companies such as Property 118 have been giving people. Property 118 has gained attention for promoting what it claims to be tax-efficient structures for property investors. These schemes often involve the use of partnership structures, limited companies, trusts, and offshore entities to supposedly minimize tax liabilities. However, the reality is that many of these structures are legally dubious and may not withstand the scrutiny of HMRC (Her Majesty's Revenue and Customs).
Instead of us going into huge details on what salesman of Property 118 has been selling, we will point you in the direction of Dan Neidle a prominent tax expert who has been highlighting the shocking advice they have been giving individuals. Dan breaks down in detail how the schemes are proposing they work and why they would also fail upon any scrutiny from HMRC.
https://taxpolicy.org.uk/2023/09/13/property118/
The problem with this is that it is usually the victim of the shoddy advice that gets left holding the bill to HMRC when they are told to unwind the structure they were advised to go into.
R&D Tax Fraud
Another huge fraud that Dan Neidle and his team at Taxpolicy.org have uncovered is from one of the biggest ‘R&D specialists’ in the country. R&D costs the UK around £8bn a year in claims, the HMRC believes around £1bn is fraudulent. It seems Green Jellyfish are responsible for a huge chunk of this.
The government website confirms the following.
Projects that count as R&D
The work that qualifies for R&D tax relief must be part of a specific project to make an advance in science or technology.
You cannot claim if the advance is in:
the arts
humanities
social sciences, including economics
The project must relate to your company’s trade, either an existing one or one that you intend to start up based on the results of the R&D.
To claim you need to explain how a project:
looked for an advance in the field
had to overcome the scientific or technological uncertainty
tried to overcome the scientific or technological uncertainty
could not be easily worked out by a professional in the field
Your project may research or develop a new process, product or service or improve on an existing one.
It seems a bit odd after reading the above that Green Jellyfish think they can put in R&D claims for small therapy businesses. The problem is HMRC essentially work on a ‘refund now, check later’ policy for R&D. This means that Green Jellyfish can take their chunky fees once the client is refunded, then disappear into the sunset whilst in a few years HMRC come knocking on the door of the poor business owner to challenge the refund and ask for the money back.
Please see a link to the report by Dan and his team - https://taxpolicy.org.uk/2024/08/19/green-jellyfish-r-and-d-fraud/#comments
The Risks of Following Dubious Tax Advice
The cases of Property 118 and Green Jellyfish serve as stark reminders of the dangers of following misleading tax advice. While the idea of reducing your tax bill may be tempting, it is crucial to approach any tax planning with caution and scepticism.
Here are some key risks to consider:
Legal Consequences: Engaging in tax avoidance or evasion can lead to severe legal consequences, including fines, penalties, and even imprisonment. HMRC has become increasingly vigilant in cracking down on aggressive tax avoidance schemes, and those found guilty can face significant repercussions.
Financial Losses: Many tax avoidance schemes involve upfront fees or investments that may never be recovered. Investors can lose significant amounts of money if the scheme collapses or is declared illegal by HMRC.
Reputational Damage: Being associated with tax fraud or avoidance can severely damage your personal or business reputation. This can have long-term consequences, affecting your ability to secure financing, attract investors, or maintain customer trust.
Emotional Stress: Dealing with a tax investigation is a stressful experience that can take a toll on your mental and emotional well-being. The uncertainty and potential financial ruin can be overwhelming.
How to Protect Yourself
To protect yourself from the risks associated with dubious tax schemes, consider the following steps:
Seek Professional Advice: Always consult with a qualified tax advisor or accountant who is regulated by a professional body. Ensure they have a solid reputation and experience in dealing with tax matters relevant to your situation.
Get A Professional Report: All professional and qualified tax advisers should produce a full report showing you their workings and referring to tax law throughout the report. This report is essentially an insurance policy against the HMRC. If they come knocking, you can show them a clear view of the situation.
Understand the Law: Make sure you have a basic understanding of the tax laws that apply to your situation. Do not rely solely on the advice of third parties, especially if it sounds too good to be true.
Avoid One-Size-Fits-All Solutions: Be wary of any advisor who offers a generic solution without taking the time to understand your specific circumstances. Legitimate tax planning should be tailored to your individual needs.