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My PFS - Technical news - 16/10/18


Publication date:

16 October 2018

Last updated:

05 November 2018


Technical Connection

Personal Finance Society news update from the 28th September to 11th October 2018.

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 Taxation and trusts





HMRC EIS guidance updated

(FA4, LP2)

In August 2018 a number of changes that were announced in the 2017 Autumn Budget in relation to three venture capital reliefs - Enterprise Investment Scheme (EIS), Venture Capital Trust (VCT) and Seed Enterprise Investment Scheme (SEIS) became law. HMRC has now updated its EIS guidance for the new ‘risk to capital restrictions’.

Risk to capital
These rules are intended to ensure that tax reliefs for EIS, VCT and SEIS businesses flow to risk-taking businesses and not those focused on delivering predominantly tax-motivated returns. They apply to shares or securities issued on or after 15 March 2018.

They apply a new condition to the EIS, VCT and SEIS rules to exclude investments where the tax relief provides most of the return for an investor with limited risk to the original investment (that is, preserving an investor’s capital).

To meet the risk to capital condition:

  • the company must use the money for growth and development; and
  • the investment should be a risk to the investor’s capital.

Growth and development means the company will use the investment to grow things like its revenue, customer base and number of employees.

The growth and development of the company should be permanent and not rely on the investor’s continued support.

The investment should carry a risk that the investor will lose more capital than they are likely to gain as a net return.

HMRC will not consider the maximum return an investor could get if the company is successful, because this cannot be guaranteed.

The net return includes:

  • income from dividends, interest payments and other fees;
  • capital growth;
  • upfront tax relief.


When deciding if a company meets the risk to capital condition, HMRC will look at things like the company’s:

  • sources of income;
  • assets;
  • structure;
  • use of subcontractors;
  • marketing of the investment opportunity;
  • relationship with other companies.


The company will not meet the risk to capital condition if there are risk-reducing arrangements in place, resulting in the investors:

  • getting priority over other investors;
  • protecting their money so:
  • it can be withdrawn as soon as possible;
  • that other investor’s money is used first.

As a reminder, other changes applying to venture capital reliefs include:

  • Enhanced relief limits for Knowledge-intensive companies (KICs) for shares issued, and investments made, on or after 6 April 2018, including:
  • the doubling of the amount that can be invested by individuals through EIS, from £1 million to £2 million; and
  • an increase in the amount that can be invested in total in KICs, through EIS or VCT, from £5 million to £10 million.


The enhanced £2 million investment limit applies where the amount, or the sum of the amounts, subscribed for qualifying shares that are KIC shares is £1 million or more. Otherwise, it is £1 million plus the amount, or the sum of the amounts, subscribed for qualifying shares that are KIC shares.

  • Various provisions in relation to VCTs, including where a VCT makes a further issue of shares after its first issue. For a share issue made in an accounting period beginning on or after 6 April 2018, a VCT must invest at least 30% of the money raised by the further issue within 12 months of the end of the accounting period in which the further issue was made.

Source: HMRC Guidance: Use the Enterprise Investment Scheme (EIS) to raise money for your company – dated 5 September 2018.

Technical guidance on land transaction tax relief for multiple dwellings in Wales

(AF1, AF2, RO3, JO3)

The Welsh Revenue authority has recently published technical guidance on land transactions tax (LTT) involving multiple dwellings. 

Note that Stamp Duty Land Tax (SDLT) isn’t payable on a property bought in Wales from 1 April 2018 – instead LTT is payable.

However, as for SDLT in England and Northern Ireland, there is a 3% surcharge in Scotland and in Wales on the purchase of additional residential properties, such as buy-to-let properties and second homes, for £40,000 or more.

And as for SDLT it is also possible to claim multiple dwellings relief in respect of LTT.

Multiple dwellings relief
The relief broadly applies where a transaction, or series of linked transactions, involves two or more dwellings in Wales from the same seller either in a single transaction or in a number of linked transactions - (transactions are linked where they form part of a single scheme, arrangement, or series of transactions between the same buyer and seller or persons connected to them).

In applying for multiple dwellings relief, the taxpayer will need to apply the higher residential property rates where the transaction would be subject to the higher rates for residential property rules, or the main residential property rates in cases where the higher rates for residential property rules would not apply (i.e. a mixed-use property transaction).

Where the relief is claimed, the amount of LTT which applies to the consideration attributable to interests in dwellings is determined by reference to the amount of the total consideration attributable to the dwellings, divided by the number of dwellings (to establish the mean consideration attributable to the dwellings). In the event that the amount of tax calculated by this method is less than 1% of the consideration given, a minimum amount of tax rule is triggered to ensure an effective tax rate of at least 1% is applied to transactions involving multiple dwellings.

The rules applicable can be complex depending on the specific circumstances. That said, the technical guidance includes information on key terms and definitions, exceptions and exclusions, how the relief would be calculated (setting out a step-by-step calculation), how the relief applies to partnership transactions and also the treatment of halls of residence.

While those who are likely to be involved in such transactions will seek legal advice in this regard, having an awareness of these rules will no doubt help build client confidence.

Source:  Land Taxation Tax relief for acquisitions involving multiple dwellings; Technical guidance from the Welsh Revenue Authority updated 10 September 2018.

New stamp duty surcharge for non-UK resident property buyers

(AF1, RO3)

Theresa May announced, at the Conservative Party conference, proposals for a Stamp Duty Land Tax (SDLT) surcharge of 1% or 3% on non-UK resident buyers of UK properties.

She told the conference that the money raised by the new tax will be used to address homelessness. She said that it 'cannot be right' that non-residents and foreign companies can buy properties as easily as British residents.

A consultation on the proposal, which is expected to set out when the new surcharge will be introduced, will be published shortly.

Note that SDLT isn’t payable on a property bought in Wales from 1 April 2018 – instead Land Transaction Tax (LTT) is payable.

In Scotland, Land and Buildings Transaction Tax (LBTT) replaced Stamp Duty Land Tax in April 2015.

As for SDLT in England and Northern Ireland, there is already a 3% surcharge in Scotland and in Wales on the purchase of additional residential properties, such as buy-to-let properties and second homes, for £40,000 or more.

Most foreign investors should already be paying the existing 3% additional SDLT surcharge for buyers of second homes and it’s assumed the newly proposed surcharge will be payable in addition to this.

According to recent Government statistics, SDLT receipts increased by 10% to £12,905 million between 2016/17 and 2017/18. Within England, transactions in London contributed the most SDLT revenue - £4,860 million; 39% of total receipts. Transactions valued at £250,000 or less accounted for 61% of transactions, and 12% of total SDLT receipts in 2017/18, whilst properties over £1 million accounted for 3% of transactions and 44% of total SDLT receipts.

SDLT is often seen as a likely contender for further tax increases. Even before Theresa May announced proposals for a new surcharge on non-UK resident buyers of UK properties, speculation had already been fuelled by recent
rumours that the Treasury is contemplating an increase in the existing 3% second home surcharge.

However, any increases could be coming at a time when there appears to be a general slow-down in the property market and reduction in stamp duty receipts. According to the latest HMRC stamp duty statistics, although
the estimated number of UK residential property transactions in August - 99,120 – represented an increase of 1.3% from July 2018, this is 2.6% lower than August last year.


  • HMRC National Statistics: UK Stamp Tax statistics – dated 28 September 2018;
  • HMRC National Statistics: Monthly property transactions completed in the UK with value of £40,000 or above – dated 21 September 2018;
  • Conservative Party Conference speech – dated 29 September 2018.

Law change for mixed-sex couples

Theresa May has announced that all couples in England and Wales will be able to choose to have a civil partnership rather than get married.

The proposed change comes after the Supreme Court, in June, ruled in favour of a mixed-sex couple, who wanted to be allowed to have a civil partnership. The couple said the "legacy of marriage... treated women as property for centuries" and was not an option for them and feel that this was a “major step” forward. The Supreme Court’s press release summarising the case details can be read here.

The couple campaigned for four years to get the law changed. This resulted in more than 130,000 people signing an online petition in support of civil partnerships for everyone.

Others have taken to social media to welcome the news and even taken the extra step of proposing a civil partnership to their partner.

Same-sex civil partnerships became law in 2004, and same-sex partners have been allowed to enter into marriage since 2014 so, by changing the law to enable mixed–sex couples to also be able to enter into a civil partnership, addresses the ‘imbalance’ that allowed same-sex couples to choose, but not mixed-sex couples. At present, though, there is no set date as to when the change will become law as the government will first consult on the technical detail.

In addition, the Scottish Government is also carrying out a consultation on allowing mixed-sex couples to enter into civil partnerships. However, their consultation also sets out an alternative option for the closure of civil partnerships to new relationships from a specific date in the future.

Source:  Announcement at Tory Party Conference

Adviser research on IHT and estate planning

(AF1, RO3)

Technical Connection were presenting at an event run by the Cicero Group on 2 October at their offices in Old Bailey. Cicero were presenting some really interesting and insightful research on inheritance tax (IHT). 

The Cicero presentation summarised the results of the adviser research on IHT and estate planning. The research delivered some very encouraging observations for both advisers and the wealth managers and other financial institutions that support them. Of particular interest to me were the following outputs from the research:

  • 76% of advisers stated that IHT and estate planning is critical to their advice proposition;
  • 51% believe it will become even more important in the coming year;
  • In 2017, advisers had carried out IHT planning with 18% of their clients – this had climbed to 34% in 2018;
  • Advisers had discussed but not carried out/executed IHT planning with 49% of their clients;
  • The two major areas identified as having the greatest capacity to make a positive impact on the level of interest/activity in IHT and estate planning were:
  • greater adviser expertise;


  • greater adviser proactivity;
  • 95% of advisers value IHT/estate planning education; and

Expertise/experience, level of support/service and technical support were the three most important deliverables from providers and platforms wishing to do business with advisers.


The market so far in 2018

(AF4, FA7, LP2, RO2)

The third quarter of 2018 is over. Returns have been mixed, with the USA the standout performer.

For markets it has been an interesting nine months, with a fair slice of performance – good and bad – down to what has been happening in the USA. The country has experienced three hikes in interest rates (with another still earmarked for December). On this side of the Atlantic, the Brexit process has rumbled on with no clear end yet in sight, while the Eurozone ended September with a renewed round of jitters about the financial profligacy of Italy’s populist government.

For all the noise, many markets are little changed across the first nine months of 2018, a fact illustrated by the graph of the FTSE 100 Index for the year to date:


Looking more broadly, the nine-month outturns are shown below:




YTD Change

FTSE 100




FTSE 250




FTSE 350 Higher Yield




FTSE 350 Lower Yield




FTSE All-Share




S&P 500




Euro Stoxx 50 (€)




Nikkei 225




MSCI Em Markets (£)








2-yr UK Gilt yield




10-yr UK Gilt yield




20yr US T-bond yield




10-yr US T-bond yield




2-yr German Bund yield




10-yr German Bund yield
















UK Bank base rate




US Fed funds rate




ECB base rate




A few points to note from this table are:

  • The FTSE 100 has been on a rollercoaster ending up slightly short of where it started the year. Add in dividends – the yield on the FTSE 100 is now 4.01% - and the market produced a small positive total return.
  • The FTSE 250, regarded as a better yardstick for UK plc (although still with a weighting of overseas revenues of around 50%), has performed much the same as its FTSE 100 multinational counterpart. The problems of the retail sector have continued, along with Brexit uncertainties.
  • The US market performed strongly, helped by tax cuts and rising revenues. Rising interest rates and the vagaries of Donald Trump economic ‘policies’ seem to have passed the market by, witness the longest ever bull run for the S&P 500 recorded recently.
  • The Eurozone economies showed signs of losing momentum, with politics casting a cloud in Italy.
  • Emerging markets were the worst performers hit, as earlier in the year, by the rising US dollar and interest rates, with the most obvious victims once again Turkey and Argentina.
  • Bond yields have headed upwards over 2018 in the UK and US but remained flat in the Eurozone (excluding Italy). A fourth US rate rise is expected in December, with the next UK increase possible in February unless the inflation numbers improve and/or Brexit talks break down. The yield on 10-year US Treasury Bonds appears to be settling above 3% and is still close enough to the 2.7% 2-year bond number to keep some pundits watching for an inversion of the yield curve, followed by a recession.

We have said it before, but a look across the year-to-date is a reminder of just how much day-to-day noise can hide what is – or is not – happening to investment returns.

Sources: FT, FTSE, MSCI, LSE, STOXX, Bank of England, Federal Reserve, European Central Bank

 Going up...

(AF4, FA7, LP2, RO2)

US Treasury bond yields are rising. They could have further to go, with unwelcome side effects.

The end of the 30-year+ bull market in bonds has been regularly forecast, but with little success. Bond yields seemed to have become a ‘widow-maker’ for those pundits who thought the latest all-time low was a turning point. Now, once again, some brave souls are calling an end to the extended bond bull market. To see why, look across the Atlantic at what has happened in 2018.

For a start, the US Federal Reserve (the Fed) has raised its main short-term rate three times this year, from 1.25%-1.50% to 2.00%-2.25%, with a (final) 0.25% increase expected in December. The Fed has another three rate rises currently pencilled in for 2019. The march up of short-term rates, which started at the end of 2015 and gathered pace last year, has driven up the yield on the 2-year US Treasury Bond by almost 1% since January.

More significantly, the yield on the 10-year US Treasury Bond, a common benchmark for risk-free returns, has decisively moved above 3% in the past few weeks. The 3% level has been widely viewed as a key threshold after the Bond almost breached that ceiling at the start of 2014 before dropping back to a record low of 1.36% in July 2016. The 30-year Treasury Bond, which is the basis for setting US mortgage rates, has followed much the same path as the 10-year Bond. The 30-year Bond now yields 3.4%, its highest level in over four years.

While the 2-year Bond’s yield rise is largely related to the Fed’s interest rate actions, the longer-term bond yields are being driven up by other factors:

  • Thanks in part to the Trump tax cuts, the US economy is growing strongly – the latest GDP figures show quarterly growth running at an annualised 4.2%. 
  • US unemployment continues to fall, with the rate now close to a 49-year low at 3.7%.
  • Inflation has been rising during 2018 and is currently marginally above the Fed’s 2.0% target on its PCE measure. The growing economy and low unemployment are expected to put further upward pressure on prices, as will the President’s trade tariffs.
  • The supply of US Government debt is on the increase. Some of this is a direct result of Trump’s unfunded tax cuts, while the Fed’s gradual unwinding of quantitative easing (QE) means it is now only partially replacing its stock of bonds as they mature.
  • The European Central Bank is phasing out its QE exercise by the end of 2018, which is already reducing the European appetite for US bonds. Japan’s central bank also appears to be easing up on its QE programme, with similar results.

Rising bond yields in the US have already hit emerging market fixed interest securities and could impact other markets – UK 10-year bond yields are now at their highest in over two years. The next big question is how rising yields will affect global equity markets, many of which remain close to all-time highs.

Sources: Federal Reserve, Trading Economics,, ECB 8/10/18


HMRC salary sacrifice guidance updated
(AF3, FA2, JO5, RO4, RO8)

HMRC have updated their salary sacrifice guidance for advisers and employers.

The guidance also reminds of the state benefits that may be affected by salary sacrifice which reduces national insurance contributions below the threshold on which certain state benefits are accrued, for example:  

  • State pension
  • Statutory pay such as statutory sick pay
  • Earnings related benefits such as maternity allowance 

Also consider if the definition of pensionable salary is based on the pre or post sacrificed amount as this will have an impact on the contributions being paid to a pension scheme.

It can be worth reviewing the wording of salary sacrifice arrangements to check that they are operating as expected and can cope with changes such as a change in the level of sacrifice without requiring an amendment to the members contract.

 Pension schemes newsletter 103

(AF3, FA2, JO5, RO4, RO8)

The latest HMRC pension schemes newsletter covers:

  • updating scheme administrator details
  • operating PAYE on pension payments
  • Master Trusts
  • reporting of non-taxable death benefits
  • Relief at Source
  • Annual allowance - pension savings statements for tax year 2017 to 2018
  • Trust Registration Service

Issues of interest

Reporting of non-taxable death benefits

They now aim to fix this in October, and we’re sorry for any inconvenience this delay may cause. We will continue to keep you updated through our pension schemes newsletters at the end of each month.

To request an email when this issue is fixed please email: putting ‘Reporting of non-taxable death benefits – fix’ in the subject line of your email.

Annual allowance - pension savings statements for tax year 2017 to 2018

Reminder to scheme administrators that by 6 October 2018 they must issue annual allowance pension savings statements for tax year 2017 to 2018 to all members who contributed more than the annual allowance to their pension scheme.

Trust Registration Service

Pension schemes that are registered with HMRC

Pension Schemes Newsletter 98 explained that if a registered pension scheme is a trust, the scheme trustees do not need to register separately on the Trust Registration Service (TRS) to meet their reporting obligations under The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 when they incur a UK tax liability.

Trustee’s of a registered pension scheme seeking a repayment on investment income or gains and that do not have a Unique Taxpayer Reference (UTR), must first complete an APSS146 form and then form SA970 to apply for a repayment of Income Tax that has been deducted from the investment income of the registered pension scheme.

Pension schemes that are not registered with HMRC

Trustees of a pension scheme that is not registered with HMRC but is set up as an express trust, that incurs a UK tax liability and already has a UTR, will need to register on TRS no later than 31 January after the end of the tax year in which you the UK tax liability was incurred. This is to meet reporting obligations under The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017.

For those that don’t already have a UTR, the trustee will need to register by 5 October after the end of the tax year in which the charge became due so that tax can be paid on pension investment income or gains for the first time. This is to make sure the trustee gets a UTR in time to meet the self-assessment filing deadline.



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This document is believed to be accurate but is not intended as a basis of knowledge upon which advice can be given. Neither the author (personal or corporate), the CII group, local institute or Society, or any of the officers or employees of those organisations accept any responsibility for any loss occasioned to any person acting or refraining from action as a result of the data or opinions included in this material. Opinions expressed are those of the author or authors and not necessarily those of the CII group, local institutes, or Societies.