November 20th 2019

Considerations for Private Clients on the event of a Corbyn Government

The possibility of a Corbyn government, and its associated ramifications, has been a topic of discussion amongst many. With election day looming, it is appropriate to consider the reality this change in government might have on our clients. We have also looked to suggest some pragmatic measures clients may want to consider. It is very difficult to advise in this realm as we are dealing with more that is unknown than known. Further, a newly elected government reneging on their manifesto statements is far from fanciful. We have utilised the tax policies proposed in the 2017 Labour manifesto as they are yet to publish their 2019 election manifesto and changes may be made to their previously suggested strategy.

The considerations offered below are not to be construed as tax advice, but rather sensible options for consideration and dialogue with clients’ tax advisers.

For ease, these are in bullet form and are not in any specific order of importance.



45% income tax for those earning £80,000 - £122,999

50% income tax for those earning £123,000 or above

‘Excessive pay levy’ for those with total compensation above £330,000 / year


There may be little that can be done regarding these increases when it is not possible to control the various sources of income paid. Clients should maximise their annual tax- efficient allowances to include funding of pensions (income tax relief and tax-free growth), utilisation of annual ISA allowances for adults and children (tax-free income and growth) and gifts to charity (income tax relief and potentially capital gain-free). If still available, clients should consider investments which offer income tax relief such as Enterprise Investment Scheme Investments and Venture Capital Trusts, noting that these investments must be selected based upon the underlying investment and not the tax reliefs available.



The current IHT rules would be scrapped, and in their place a lifetime gift tax introduced. The tax-free allowance would be £125,000. This amount is less than 50% of the current tax-free allowance – known as the Nil Rate Band – at £325,000 (2019/20). It is proposed that lifetime gifts in excess of the £125,000 will be taxed at the recipients’ marginal rate of income tax. The Residence Nil Rate Band, which gives a maximum of a further £175,000 (2020 – 2021) IHT- free allowance on the passing of the family home to direct descendants would also be scrapped.


Where appropriate and sensible for both donor and recipient, consider advancing any lifetime gifts whilst there is no lifetime gift tax; this is a significant decision to make prior to December 12th with no certainty of a Corbyn government coming into being. Great care should be taken, as receiving a substantial gift at a less opportune time for the recipient can have negative consequences. Further, we would not recommend that any parent put their financial security in the hands of their children by excessive, premature gifting. For the gift to be effective for IHT it must fully leave the estate and control of the donor and become a free asset for the recipient.



These allowances are deemed to favour the wealthy and so they are expected to be restricted but details have not been forthcoming as to the nature of the restriction(s).


If there are opportunities to crystallise assets and claim Entrepreneur’s Relief, it would be valuable to do that as soon as possible. Assets that benefit from Business Property

Relief could be placed into trust (as these assets have a zero charge to IHT, it is possible to place an unlimited amount into a discretionary trust). Assets that benefit from Business Property Relief could be shared with a spouse (no immediate tax liability would arise on this transfer) as it is possible that the level of taxation may be tiered / reflect the marginal rate of income tax of the recipient. If Business Property Relief and Agricultural Property Relief retain their IHT advantage, these assets could be considered for early lifetime gifting to the next generation or passing to the next generation on the first to die, through instructions in a will.



Raise corporation tax rates from 19%to 26%.


For those owning shares in a Family Investment Company (FIC), consider a share reorganisation, providing share entitlement to as wide a group of beneficiaries as sensible. This will not alter the higher rate of corporation tax charged. However, if the increased level of taxation makes the company a less attractive vehicle to retain funds in longer term, having a diverse spread of shareholders may provide greater opportunities for passing out the value from the FIC tax efficiently. Consider in particular the next generation holding growth shares so that all future growth on the value of the FIC is immediately out of the estate of those that funded the FIC.



It is proposed that SDLT be phased out for those buying a home for themselves to live in. However, for non-domiciled individuals, non-resident individuals, companies and those buying a second home or investment property, it is proposed that the rates of SDLT are increased. It is further proposed that the SDLT be charged on the sellers, not the purchasers.


UK resident and domiciled individuals looking to purchase a second or investment property may do better to wait to see the outcome of the election as any stamp duty might thereafter fall on the seller rather than the purchaser. For those corporates who hold UK property, moving the property out of the corporate structure should be considered as many of the advantages to holding UK property in this structure have now been eroded. Those non-domiciled individuals and non-resident individuals who are looking to sell UK property should do so under caution if these proposals come to fruition as they may have paid SDLT on their original purchase and may also suffer SDLT on the sale. UK property purchase should be considered a long-term investment as many of these proposals, plus the potential impact on interest rates and the ‘Land for the Many’ proposals detailed below, could have a detrimental impact on property prices, at least in the short term.



Abolish the non-domiciled tax regime at their first budget.


For those non-domiciled individuals who have a viable and desirable alternative country base, it is sensible to compare the tax regime that may come into effect in the UK with their other option/s. In preparation for this, they may want to consider ensuring funds are held in the relevant offshore jurisdictions, in the appropriate currency and offering ease of access. In keeping with generic non-domiciled advice, it is sensible to retain only those assets in the UK such as are needed for ongoing UK expenditure. For those deemed domiciled individuals, all the above would apply. Great care needs to be taken when living across several jurisdictions as it is possible to become tax resident in several different places at any one time.



Basic rate tax relief for capital gains would be scrapped and higher rates would be brought in, aligning the rates with income tax rates. The proposals state that there are no plans to remove the CGT exemption for individuals’ main homes, but gains made on investment properties would be taxed at the sellers’ rate of income tax.


Where assets stand at a gain and are available for sale, consider crystallising the gain whilst the top rate of CGT for non-property assets stands at 20%. These assets can be bought back after 30 days (the seller is subject to market movement which could make the trade ultimately unfavourable). This rebases the asset for future gains calculations (assuming further gains are made). Additionally, assets can be passed between spouses without triggering tax. This may allow the ownership of the assets in question to be spread between spouses for sale, thereby utilising two capital gains annual allowances (£12,000) and two tax positions. It may also be possible to switch assets with a high propensity for growth into existing tax-advantaged wrappers such as a Self-Invested Person Pension (SIPP), ISA portfolio, offshore insurance bond (in line with the Permissible Funds Rules for Offshore Insurance Bonds). In practice, this can be achieved by creating the necessary liquidity within the tax-advantaged wrapper (at no tax cost) and then the desired asset is purchased within the wrapper and subsequently sold down outside of the wrapper. The gain triggered on the sale would be chargeable to gains at the current attractive rate of CGT.



To renationalise previously state-owned organisations such as water, rail, electricity and mail companies. There is no specific allocation for this spending in the Budget and so it is widely expected that this will be funded by government borrowing.


Whilst not a specific tax change, the impact of this policy may have a notable impact on individuals’ share holdings as it is expected that the price for the shares will be set by the government, which may well be less than face value. A debt-for-share swap is a possible route for such transactions. Further, many of the shares that may be in question are those found in many standard pension portfolios. The impact on the value of such a portfolio may be significant if a large percentage of the portfolio is affected. The borrowing required to fund the renationalisation could be expected to send share prices falling and gilt yields rising. A further potential impact could be that interest rates may well rise, and this could have a negative effect on mortgage and Lombard lending.



Council tax would be abolished and replaced by a property tax paid only by the owner of the property, based on current house prices. Landlords could pay a capped portion of the tax out of their capital gains when they sold the property. Homeowners with bigger properties, or in areas with very high land prices, would pay much more, and empty homes and second homes would pay the highest tax rates.

Tenants would have the ‘Right to Buy’ their rental property from private landlords at market price.


The various measures above, added to the unattractive climate for purchasing UK property for non-domiciled and non-resident individuals, the potential taxing of gains made on a second and investment property at the sellers’ rate of income tax, plus the renationalising of British industry pushing up interest and mortgage rates may all have a detrimental impact on the property market. Landlords could find themselves having to sell a property under ‘Right to Buy’ in a depressed property market, and where the debt has outstripped the property / sale price. To safeguard against such a turn of events, reduce leverage on property investments where

possible and consider any UK property purchase as a long-term investment opportunity.


This is not in the Labour manifesto and John McDonnell has explicitly stated in an FT interview that there will be no capital controls (January 2019).

Jim Pickard, Chief Political Correspondent, January 23, 2019 Shadow chancellor John McDonnell has sought to reassure the City of London that the Labour party would not impose capital controls if it came to power. Mr McDonnell said Labour had stepped up its preparations for governing amid growing speculation on a snap general election. Those talks are being marshalled by Bob Kerslake, the former head of the civil service. “In each of the various discussions I have had, because it keeps coming up in the media, I get asked what happens with capital controls,” he told the Financial Times. “I want to make it explicit that we will not introduce capital controls.”

However, for completeness, as it has widely been raised as a possibility in the press, we will consider the potential scenario of capital controls being introduced.


Clients can consider establishing accounts overseas and moving a portion of their assets offshore. This makes sense if an individual already holds assets, has a holiday home or has family that they regularly visit in other jurisdictions. Further, if a significant capital outlay is expected offshore, it may be sensible to move the required funds into the appropriate currency and to the country where the funds are required. With the arrival of global tax reporting in the form of Common Reporting Standards (CRS), holding funds offshore requires the same UK tax reporting as an onshore account and, for UK tax residents who are liable for tax on a worldwide basis, there are no tax economies to be had with holding the funds offshore. This is a positive in that there should be no concern raised with HMRC in opening such offshore accounts.

Reputable institutions are geared up to offer UK reporting as a matter of course. There are no details on what form any capital controls may take, but, considering the position in the 1970s as a gauge, it may be surmised that there could be a tax penalty imposed on moving funds out of the UK as a disincentive. The specific offshore jurisdiction chosen is also important as CRS rates the different jurisdictions based on their tax compliance and efficiency with reporting individuals’ tax affairs. This will have a material impact on how HMRC view the establishment of such an offshore account. By way of example, Switzerland falls within the category of Tier 1 countries for global tax compliance.


When considering all potential nuances that may occur with such a polarised general election, basic wealth planning principles are very important. These can be summarised as follows: -

Clients are best served by holding their wealth spread across a diverse range of conventional, non-contentious tax-efficient strategies, facilitating a variety of methods for extracting funds and the subsequent tax to be paid. This allows clients to be flexible in being able to ‘switch off’ one form of ’income’, if that has become punitive from a tax point of view, and allowing the ‘switching on’ of a more favourable route. It is in the use of the blend of options, that clients optimise their tax positions.

Utilise both spouses’ and adult children’s tax allowances and thresholds. Seek to crystallise a tax charge in the hands of the family member who requires the funds (rather than crystallising in the parents’ hands at their rate of tax and then passing the funds, net of tax, to the child), using all available rates and allowances where possible and appropriate. Certain structures support this process; for example, the offshore insurance bond which allows the assignment of segments from the bond without a tax charge to the donor.

Ensure your wills are up to date and are suitably structured to protect any overseas assets (which may require a will in that alternative jurisdiction). It is vital that all wills are co-ordinated to ensure they do not negate each other. Clients should also ensure their Expression of Wish is up to date for any pensions they may hold. Establish powers of attorney for your financial affairs and health and well-being.

Any reference to tax detailed above should not be construed as tax advice. What has been offered here are generic considerations. We would always recommend that you seek specific advice from your own tax advisers as your personal circumstances may render a sensible generic idea invalid in your circumstances.

If you have any questions, please feel free to contact your client partner or any member of the Wealth planning team (contacts below).

Jane Fowke +44 (0) 7741 878 544

Ross Brown +44 (0) 7921 807 976

Ben Barnaby +44 (0) 7467 836 688


This document is for information only and is intended to highlight some generic examples of possible strategies to manage the risks that could arise in the future with a possible change of government. Nothing in this brochure is intended to be or should be construed as advice. Reliance should not be placed on the information contained within this brochure when taking individual decisions.

As explained above, we are not tax advisers. Any decisions you make regarding tax should be made in conjunction with your tax adviser.

Any advisory services we provide would be subject to a formal Engagement Letter signed by both parties.

Artorius provides this information in good faith and believes the information contained herein to be accurate, however, by its very nature, the information is generic and for example purposes only. We do not warrant its completeness and accuracy and do not accept any liability for any errors or omissions, nor for any actions taken based on the contents of this brochure. We may update this information at any time and without notice.

Artorius Wealth Management Limited is authorised and regulated by the Financial Conduct Authority. Artorius is a trading name of Artorius Wealth Management Limited.

Artorius Wealth Switzerland AG is a provider of wealth management services to the benefit of private individuals. We are an active member of the Swiss Association of Asset Managers (“SAAM”) – a Swiss self-regulating organization in matters of anti-money laundering and asset management recognized by the Swiss Financial Market Supervisory Authority (“FINMA”).

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