The UK needs to become more tax competitive if it is to attract greater levels of investment after Brexit, according to tax and advisory firm Blick Rothenberg.
The UK’s strong track record in securing overseas investment is being put at risk by Brexit, with the number of jobs created and foreign capital deployed in Britain falling sharply since the EU referendum.
Robert Pullen, a partner at the tax and advisory firm, said: “The country is now at a Brexit crossroads where some sort of deal may be done over the next few days and weeks. It is absolutely critical that the UK now looks at how it treats people who wish to invest in the UK and live here.”
He continued: “Over the summer, there was much speculation that inheritance tax would be increased or business reliefs from the tax would be restricted in some way.
“This speculation proved to be incorrect, at least for the time being. However, the nil rate band, i.e. the tax-free amount not subject to inheritance tax, is fixed at £325,000.
“Any value in excess of this amount attracts a high 40% tax rate. As such, the UK’s inheritance tax regime is not set up to encourage inward investment, in fact it actively discourages this.”
Pullen points to the US as offering a “very generous” tax regime, and urges the UK government to address the imbalance by increasing the tax-free amount and commit to keeping the business relief so that individuals can plan with certainty.
“A longer-term view is needed, rather than short term reactionary measures which are ill thought out,” he added.
Another partner at the firm, John Bull, agrees that if we contrast the UK tax regime with the US tax system for example, “the difference is stark”.
He commented: “Although US Federal gift & estate tax has been a political hot potato for well over 20 years, effective 1 January 2018, President Trump dramatically increased the US Federal gift and estate tax exemption from $5.49m (£4.15m) to $11.18m (£8.46m).”
He added” “In today’s terms the exemption stands at $11.58m [£8.76m] per person, or just over $23m [£17.4m] for a married US couple, which takes the vast majority of US families out of US Gift & Estate tax.
“However, the winds of political change could soon reduce this significant variance – if the Democrats, led by Joe Biden, prevail in November it is well publicised that a reduction in the US exemption will be high on the tax policy agenda.”