Family businesses could well be included as part of a multimillion pound tax crackdown on “mid-size businesses and wealthy individuals” set to begin next year.
NFU Mutual’s analysis of documents released following the Budget has revealed tens of millions will be spent on targeting people and businesses in a bid to claw back more than £300m in extra taxes over the next six years.
Sean McCann, chartered financial planner at NFU Mutual, commented: “What the Treasury refers to as ‘wealthy individuals’ is also likely to include some family business owners who may own business assets but earn modest incomes. These are the people who, perhaps more than ever, most need professional advice to make sure they don’t fall foul of the rules.”
The tax crackdown is part of a £155m investment in HM Revenue & Customs announced by Phillip Hammond in his Autumn Budget. At least £30 million of the extra money will go towards recruiting more tax specialists and new technology.
The latest tax receipts indicate a crackdown on inheritance tax is already underway with HMRC now on course to take more than £5bn from people’s estates this tax year. Forecasts from the Office of Budget Responsibility also show Capital Gains Tax (CGT) receipts are set to surge by more than 40 per cent by 2020.
“Claims for inheritance tax reliefs, which are essential for many family businesses, are already being vigorously challenged by the taxman,” Sean added. “As a result, we’ve already seen inheritance tax returns surge by more than 15 per cent this year. It’s one of the most complex taxes and there are plenty of pitfalls that many people don’t know about.”
HMRC’s new technology is also likely to track down people who sell rental properties and holiday homes but don’t declare the capital gain.
Sean continued: “The taxman already monitors property transactions and it’s highly likely that any new technology will shed more light on cases where ownership changes hands but a capital gain hasn’t been declared.
“What often catches families out is when a property is given to a son or daughter. In the eyes of the taxman, gifting to someone other than a spouse or civil partner is the same as selling and these cases can result in a surprise Capital Gains Tax bill for the parents.”