Inheritance Tax Planning & Other Stuff

10th November 2013

Inheritance tax planning and other stuff

So what is new, what is old, what is good and what works?

Business property (BPR) Inheritance tax (IHT) relief is fantastic.

ISA’s are now allowed to invest in shares in Alternative Investment Market (AIM). Many people have significant value in their ISA portfolios, and estates such that these will attract inheritance tax. These ISA’s can now be transferred into selected shares in AIM, and will be outside the estate in 2 years time. Full ownership and access is retained, no complex trusts and sacrifice of control. They will still be ISA’s, with the income and capital gains tax advantage of the ISA retained.

Are you holding a power of attorney and are you trying to manage the financial affairs for someone with an IHT problem – it is very difficult to get the court of protection to agree to a transfer of ownership which most solutions would require.

No problem – transfer into a BPR qualifying investment, (no transfer of ownership that would need approval) and as long as the owner lives for two years the money is outside the estate with access to it and control remaining with the attorneys.

How about multiple tax advantages? Perhaps you have just sold something at a profit or cannot release funds without doing so, perhaps from an equity or property portfolio. No problem, sell, reinvest into an Enterprise Investment Scheme (EIS).

Sell, roll the profit over into the EIS, therefore deferring Capital Gains Tax (CGT), get income tax relief at 30%, hold for 2 years and the EIS is free of IHT and at death the rolled over CGT also disappears.

I estimate that gives total tax relief of 18-28% CGT + 30% income tax, plus 40% IHT or a massive 88-98%. (You do actually need to have paid the income tax in the first place over the last 2 years, but the income tax relief is really just the icing on the cake).

And if you take income from the EIS that is tax free as well, an additional 20 – 45% saving or 108-143%. (It would be unusual for all these features to be combined but it was fun working it out).

I have omitted lots of small print, these are headlines only and the BPR solutions may not be suitable for a particular individual but balanced against the otherwise certainties of CGT and IHT you may wish to make further enquiries.

Are you managing Trust Funds and fed up with the trust tax accounting and its costs?

Invest in a single premium bond and the annual income and CGT tax accounting can go up in a puff of smoke and if you wish to continue to manage the funds it is simple these days to retain total control over that, or delegate that as well.

Finally I have joined a consumer service called “Vouched For” which seeks to give trusted IFA details to consumer enquiries, you can help me there, if you can offer me a review. I will be grateful if you could do that in which case please use this link,