By planning in your lifetime, you can maximise the amount you leave your loved ones. At Clarke Mairs we can provide advice to help minimise the inheritance tax paid on your death. For example, we can provide advice on:
- Making lifetime gifts
- Structuring Wills to minimise inheritance tax
- Deeds of Variation
- Business successsion planning
DID YOU KNOW
- There are a number of pitfalls to avoid Business Property Relief (“BPR”) being lost. For example:
- Businesses can evolve over time into a company which no longer qualifies for BPR. Businesses whose main activity of the company is dealing in securities, land or buildings, or investments do not qualify as a trading company and will consequently not qualify for BPR.
- If you own the property used by the company, you will only gain 50% BPR if you control the company (usually by owning 50% or more of the shares) and no BPR if you don’t control the company. 100% BPR is, however, available if the property is held in a “trading company”.
- Cash balances in a company will be scrutinised by HMRC. To convince HMRC that the cash is genuinely required for trade and allowable for BPR, you should have in place cash flow projections and directors’ minutes setting out what the accumulated cash has been earmarked for.
- If there is a binding contract for sale, for example, an arrangement between partners that on the date of death of any of them the surviving partners must buy out the deceased’s partner’s share, this will destroy the availability of BPR.
- To avoid this scenario, cross-option agreements can be put in place. We can advise on these.
- Assets qualifying for Business Property Relief can be placed into a trust to save inheritance tax. For example, if the wife does not want to run their late husband’s business, the husband could place the business into a discretionary trust on his death which means his wife would not have to pay inheritance tax on business assets if they were sold at 40%.
- The Residential Nil Rate Band (“RNRB”) adds an additional tax free amount of £125,000 (2018/19) increasing to £175,000 (2020/21) on top of the £325,000 IHT free allowance every individual is allowed, where a homeowner leaves their home to direct descendants (e.g. children, grandchildren, step children). This valuable relief can be lost depending on the way your Will is set up, the action taken by executors when you die, and the size of your estate. Where the deceased’s net assets exceed £2,000,000 (ignoring BPR and agricultural property relief) the RNRB will be reduced by £1 for every £2 over £2,000,000. Lifetime and Will planning can help maximise the available relief.
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