1 / 22

Lifetime gifts, trusts and business reliefs, companies and partnerships

This article discusses the importance of succession planning and provides strategies and tools to help with the process. It covers topics such as lifetime gifts, trusts, business reliefs, and incorporation.

vsilvers
Download Presentation

Lifetime gifts, trusts and business reliefs, companies and partnerships

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Lifetime gifts, trusts and business reliefs, companies and partnerships Alison Robinson Partner – SafferyChampness, Harrogate 19 September 2019

  2. Succession planning • No one size fits all – genuinely bespoke • Where to start? • Where are you now? • Where do you want to be? • Timeframe – longer the better • Quick wins? • Long term strategy • Communicate!

  3. Tools to help • Holdover/rollover • CE • Maintenance Funds • Spouse exemption • PETs • APR • BPR • ER • Trusts • Chattels exemption • Gifts • Incorporation

  4. Case study - Background • Roger and Susan (H&W) • 2 children – Peter and Mary • 1,000 acre in hand (contract farmed) in farming partnership (Roger & Susan) • 500 acres land on FBT with development potential (Roger) • 500 acres land let to farming partnership (Roger) • 15 cottages (Roger) • Historic House – open to the public (Roger) • Large portfolio of shares (Roger) • House in London (Roger)

  5. Case study – background continued • Roger works in London and lives there in the week with Susan. London House is PPR • Roger will get a defined benefit pension from his job • Roger is 20 years older than Susan and wants to provide for her in the future • Peter is to inherit the estate • Roger and Susan want to be fair to Mary • Currently prepare accounts separately for: • Farm partnership • House opening trade • Rental income

  6. Case study – current position - IHT • 1,000 acre in hand in partnership – 100% BPR • 500 acres land on FBT with development potential – 100% APR on agricultural value • 500 acres land let to farming partnership – 100% APR • 15 cottages – No relief • Historic House – open to the public – CE? • Large portfolio of shares – no relief • House in London – no relief

  7. Case study – quick wins? • Transfer FBT land with development potential into partnership – ‘land capital’ account • Take prior charge on profit equivalent to rent if funds needed • No SDLT as connected parties • Result – 100% BPR on full value rather than APR on agricultural value only • Why?

  8. Case study - BPR • Businesses with mixed activities can be useful to obtain relief for property that wouldn’t of itself qualify for BPR • Turnover – Profits – Capital – Time spent – Overall • Assets must be used and owned for 2 years in qualifying business • Land already used for farming – immediate relief

  9. Case study – quick wins? • Cease tenancy with partnership on 500 acres let land • Transfer land into partnership – ‘land capital’ account • Take prior charge on profit equivalent to rent if funds needed • Result – 100% BPR rather than APR • No SDLT – connected parties • Why bother?

  10. Case study - BPR

  11. Case study quick wins • Introduce cottages into the farming partnership into a ‘land capital’ account • Take prior charge on profit share if funds needed • Business remains ‘wholly or mainly’ trading so BPR on everything including cottages • Ensure correct advisor/solicitor • OTS 2nd report on IHT, 50:50  80:20?

  12. Case study quick wins • Is the historic house on the balance sheet of the house opening business accounts? • Bring into business with the intention of trying to get BPR • Create business plan • Ensure business is ‘commercial’ • Potential BPR on house

  13. Case study – revised position • 1,000 acre in hand in partnership – 100% BPR • 500 acres land with development potential (now in the partnership) – 100% BPR • 500 acres land let to farming partnership (now in the partnership) – 100% BPR • 15 cottages (now in the partnership) – 100% BPR • Historic House – 100% BPR?? CE?? • Large portfolio of shares – no relief • House in London – no relief

  14. Case study – longer term plan • Settle £325k of shares onto DT for Mary • Holdover CGT • Utilise nil rate band • Depending on M’s age shares can be appointed out – H/O • Gifting direct would generate a CGT charge OR • Identify non core property for Mary • Development land trust or gift • Chattels not CE – under £6k (£12k if jointly owned) • Chattels trust

  15. Case study – longer term plan • Bring Peter into partnership • Transfer property to Peter – 100% BPR, Gift relief • Insurance – Joint life 2nd death • MAKE A WILL!! • Spouse exemption • Spouse gift to children

  16. Lifetime gifts • Assets qualifying for APR/BPR – holdover (PET) • Regular gifts out of income • £3,000 annual exemption – use it in 2 years or lose it • Wedding - £1k/£2.5k/£5k • PETs – watch CGT

  17. Other Strategies –Incorporation • Incorporation? • Appropriate businesses • Connected – no SDLT • Incorporation relief – holdover for CGT • Issue new shares to Peter (and Mary?) – growth shares • Future growth in value passes to next generation • Flexible dividends policy • Insure in the meantime

  18. Other Strategies – incorporation • Be sure a company is right for you • Difficult to reverse • Can be expensive to get money out • Additional compliance cost • Loss of privacy • Unlimited company?

  19. Other Strategies – Entrepreneurs relief • £10 million of lifetime qualifying gains taxed at 10% • Available where • Assets sold as part of cessation of trading business • Qualifying shares sold (>5% of trading company) • Consider gifting development land to Mary for her to farm using a contractor (partnership?) • After 2 years ER • Difficulties arise where assets sold and same trade continues Eg part of farm land sold for development • Often possible to restructure business

  20. Other Strategies – Heritage Maintenance Fund • Could consider Maintenance Fund if appropriate • Type of discretionary settlement • Helps to fund the maintenance and upkeep of heritage property • Free of IHT and 10 year charge • Taxed as Settlor or trust rates • Income and capital to support heritage assets OR • Charitable Trust

  21. Summary • Be clear what you want to achieve • Non negotiable objectives • ‘Would like to have’ objectives • Are there any quick wins? • What are the options (usually more than one) • Keep it as flexible as possible – future family changes and tax changes e.g. OTS second report on IHT • Communicate to those involved • Review regularly • Ensure your advisors know what they are doing

  22. Lifetime gifts, trusts and business reliefs, companies and partnerships Alison Robinson Partner – Saffery Champness 19 September 2019

More Related