9 March 1999 Budget

Capital taxes

Capital gains tax: rates and annual exemption

From 6 April 1999, gains will be charged at 20% where the gains when added to total income are below the higher rate threshold and 40% where they exceed that limit. For 1999/2000, the annual exempt amount will be increased from £6,800 to £7,100 for individuals. Most trusts will be exempt on the first £3,550 of gains.

Inheritance tax: increase in threshold

The inheritance tax threshold will be raised from £223,000 to £231,000 from 6 April 1999.

Inheritance tax: administration

For deaths on or after 9 March 1999, personal representatives will be required to provide the Inland Revenue with full information on chargeable lifetime gifts made in the seven years before death. The Inland Revenue will be given additional powers to collect unpaid inheritance tax. There will be higher penalties for submitting incorrect information, including failure to report the setting up of a non-resident settlement by a UK domiciled person.

Inheritance tax: avoidance

Anti-avoidance provisions will be introduced to cover certain gifts of land (including houses) made on or after 9 March 1999. This provides that lease carve-out and similar schemes approved by the House of Lords in the Lady Ingram case will no longer be effective. This covers the position, where for example, a donor gifts the freehold in a property but continues to live there rent-free under the terms of a lease. Rent-free occupation by the donor's spouse is also caught.

The new provisions will not apply where the donor pays full value for occupation of the land, or the donor gives away only a share in the land to the donee which the donee then occupies jointly with the donor.

The new legislation will not apply in certain other limited circumstances, for example, where the gift of land is made more than seven years after the arrangements giving the donor or donor's spouse a right of occupation. Arrangements under which the donor grants a lease to the donee but retains the freehold which entitles the donor to reoccupy the land when the lease has ended will also be acceptable.

Stamp duty rates

The rates of stamp duty on transfers of property are as follows:

The new rates will apply to transfers on or after 16 March 1999, except for transfers made in pursuance of contracts made on or before 9 March 1999.

Stamp duty on share transfers remains at 0.5%.

Stamp duty: compliance and administration

• Interest will be charged on duty that is not paid within 30 days of the execution of a document subject to stamp duty, wherever execution takes place.
• Higher penalties will apply in future to all documents submitted for stamping more than 30 days after the document was executed. In the case of documents executed abroad, the higher penalties will apply only 30 days after the document is first brought into the UK.
• The fixed stamp duties on, for example, declarations of trust, which are currently 50p, are to be increased to £5.
• After 9 March 1999, there will be a charge on any issue of foreign currency bearer securities, unless they carry a right to interest or a dividend at a fixed rate and are subscribed for cash.
• Instruments giving effect to agreements for mergers or takeovers executed before 30 January 1999 are exempt.

Stamp duty: unit trusts and OEICS

From 1 October 1999, a new stamp duty reserve tax (SDRT) regime will be introduced for dealing in units in unit trust schemes and dealings of shares in open-ended investment companies (OEICS). The new regime will pave the way for electronic trading of units.