Inheritance tax

[Simpo Two]

There is - or at least was in 2011 - an investment scheme whereby if the donor lived for two years after the investment was made it became exempt for IHT purposes or thereabouts. An uncle of mine tried it but sadly became extinct a year early, so there was no benefit.

[Ginge R]

Well remembered. There are lots of these types of esoteric schemes around which are intended to help - is this the one you're thinking of? Still going, chum.

http://www.fimltd.co.uk/forestry/forestry-faqs

There are also some deathbed IHT schemes around, but this summer's Inheritance Tax Hallmark Regulations consultation (I think) will put paid to them. When does Business Property Relief helps too, in various investment and wrapper guises, but all though, potentially more costly and risky than boggo standard life cover. If there's one thing you want certainty of, it's this - you only get one shot at it, it's one area you should take regulated advice on.

Depending on one’s viewpoint (hand wringing liberal or powerfully built company director), any form of IHT planning is tax avoidance, so HMRC has been working overtime on establishing what is ‘acceptable tax planning’ and what is ‘unacceptable tax avoidance’? The draft Hallmark regs state that any arrangement is disclosable if:

1. one of the main purposes of the arrangement is to obtain an IHT advantage,
2. one or more elements would be unlikely to be entered into but for obtaining the IHT advantage.

This wording is potentially broad enough to net even a simple gift by a parent if it was made (in part at least) to reduce the donor's IHT exposure (should they survive seven years) and they may have decided not make the gift anyway, if were not for the IHT benefit. I just do investment planning to try and help clients; I defer to Eric's superior insight into tax specific legislation if I might be amplified upon, or clarified.

[Eric Mc]

IHT is not really my area.

HMRC (and its predecessors) have always held the opinion that any arrangement that has been entered into where the primary purpose is to avoid tax i.e there is no underlying life or business reason behind it other than tax avoidance, is not allowable - even if it is essentially "legal".

They have had varying success in applying this principle over the years.

[Simpo Two]

Ginge R said:

Well remembered. There are lots of these types of esoteric schemes around which are intended to help - is this the one you're thinking of? Still going, chum.

http://www.fimltd.co.uk/forestry/forestry-faqs

That could be it, well found!

[Ginge R]

I briefly considered it for one client, a few years back. However, reflection and a sense check prevailed. There are far more cost effective, more straightforward ways of achieving IHT objectives.

Cheers Eric.