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Implications of the election results for privately wealthy families, trusts and family businesses

Recent years have seen several democratic surprises around the world, including the election of President Trump and the vote for Brexit. The UK's 8 June general election appeared likely, when it was called 6 weeks ago, to result in a significant majority for the existing Conservative government, whose policies on taxation were well known and seemed certain to become law. By the morning of 9 June, it was apparent that the Conservative party would need to seek an arrangement with the Democratic Unionist Party (one of the main Northern Irish parties) in order to continue in government with a working majority.  Such a government is unlikely to have the voting power in Parliament to pass any difficult or controversial measures, and may avoid introducing measures on which it could be defeated.  In addition, while the Conservative party and the Unionists have traditionally been very aligned, little is known of the DUP's tax policies and, in other cases, Conservative pledges (e.g. to remove various pensioner benefits) are likely to be dropped in the face of DUP opposition.

For privately wealthy families, trusts and family businesses, this may lead to a period of relative stability without significant reforms, if changes cannot easily be agreed.  Some practical points to watch are:

Non-doms

The measures dropped from the Finance Bill in late April – including changes to the non-domicile taxation regime, and the introduction of Inheritance Tax on residential property held by companies – are likely to be restored immediately, as all parties would be likely to support them.  It is not clear if they can (legally and practically) be introduced with retrospective effect from 6 April 2017, or whether they will take effect only from 2018

Income tax

Personal tax rates are likely to stay the same for now, although the Conservative manifesto notably dropped the pledge not to raise income tax, national insurance or VAT.  All other mainstream parties pledged to increase income tax, which could be a pressure point for the new Government

Trusts and transparency

The Conservative manifesto contained an oblique pledge to clamp down on "transparency and the misuse of trusts". There is no information about what this might mean; however, it seems fair to suggest that any proposals of this kind would be welcomed by other parties

Brexit and immigration

With Brexit negotiations due to start on 19 June, a minority government will find discussions with the EU testing, and will need a more collaborative approach domestically.  All parties want to guarantee the rights of EU nationals living in the U.K., but the Conservatives were previously waiting for bilateral agreement with the EU.  It’s possible that inter-party pressure may lead to a quick announcement of a unilateral guarantee.   It seems unlikely that the Conservative pledge to reduce net immigration will go ahead, if that involves legislation other parties would find unpalatable

 

 

 

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