Fiscal Policy & Economic Backdrop
Winter 2018

Non-UK resident companies that carry on a UK property business, or who receive income or gains associated with UK property, will face the same tax rules and rates as UK resident companies from April 2020. This means non-UK resident companies will be liable to UK corporation tax as opposed to income tax and capital gains tax. Following consultation in spring 2017, the government published its decision in December. Draft legislation will be published in summer 2018.

Family Investment Companies (FICs) are increasingly being used as an alternative to trusts for long term succession planning. The UK’s low corporate tax rates (20%) and the level of control family members can retain over assets owned by a company mean that FICs can be more tax efficient than trusts, which are liable for inheritance tax charges.

The FTSE 100 reached an all-time high on the 12th January 2018, 26.7% higher than in the immediate post-Brexit period. The value of the pound has also reached $1.38 for the first time since the referendum vote, bolstered by a falling dollar and talks of a relatively “soft” Brexit.

In December, the UK rate of inflation fell back slightly to 3.0%, from its 3.1% peak in November, with the Bank of England predicting inflation to fall to 2.4% by the end of 2018. Interest rates remain at 0.5%, anticipated to rise to 0.7% during 2018 and to just 1% by 2020.