Pension Simplification

In a massive U-turn to what was expected, the intention is now to impose heavy tax penalties (up to 70%) where Self Invested Pension Schemes (SIPPs), and Small Self Administered Pension Schemes (SSASs) invest directly into residential property and other ‘prohibited investments’ such as fine wines, classic cars, arts and paintings after ‘A-Day’, 6 April 2006.

We believe this is excellent news as we have already been fending off enquiries from people who wanted to purchase a holiday home in Bulgaria via their pension plan, or their mother’s council house via a pension fund etc. It is not such good news for those product providers who have spent a great deal of time and resources in preparing to allow such investments to be included.

This change of heart by the Government will ensure that tax relief is only given to those whose purpose in making the contribution is to provide themselves with a retirement income.

There is still to be a massive change to pensions on A-Day, 6 April 2006, and if you have not filled in our short questionnaire to see if you are affected you can download a copy at www.arch-fp.co.uk/major_changes_to_pensions.htm.

Inheritance tax avoidance

There will be further anti-avoidance measures to tackle contrived inheritance tax avoidance schemes which will take effect from 5 December. However, inheritance tax is still very much a ‘voluntary tax’ and there are many perfectly permissible ways to reduce its impact if action is taken in time. You will find background information on inheritance tax on our website at www.arch-fp.co.uk/inheritance_tax1.htm

UK Real Estate Investment Trusts

The Government will bring forward draft legislation to establish UK Real Estate Investment Trusts (REITs) for inclusion in the 2006 Finance Bill. These are very popular in the United States and provide a simple way for investors to own a small share of an investment in commercial and, more interestingly, residential property without the problems normally associated with such ownership.

Corporation Tax

From 1 April 2006 the ‘small companies’ rate of 19% will apply to the first £300,000 of profits. There will no longer be a 'zero rate band' and this change will simplify corporation tax calculations and remove the tax distinction between profits that remain in the company and those that are used to pay dividends.

Venture Capital Trusts (VCTs)

The Chancellor made no specific reference to VCTs in his speech. However, he did make the following reference in the full Pre Budget Report.

'In the Budget 2004 the Government announced a temporary doubling of the rate of income tax relief for investments in Venture Capital Trusts (VCTs) to 40 per cent. This provided a stimulus to investment in VCTs, with fundraising increasing to a record £520 million in 2004.

The Government remains committed to ensuring the long-term sustainability and success of the VCT market, and will announce the future level of VCT reliefs at Budget 2006. The intervening period will allow further analysis of trends in the VCT market and continued dialogue with key stakeholders.'

Our website contains details of current VCT offers and in many cases allows you to download the relevant Securities Note and Application Form (the new name for what was previously called a 'mini prospectus')

For VCT offers follow this link