Shares held in a private company and IHT
Discussion
SHARES HELD IN A PRIVATE COMPANY AND IHT
Would the shares be valued for IHT purposes at their value as shown in the company records/’books’ or what they could actually be sold for (likely considerably less)?
If they were gifted and the shareholders lived for 7 years would there be any tax liability (I’m pretty sure they would qualify for 100% business property relief)?
Any help would be much appreciated as I struggling to get a clear understanding.
Would the shares be valued for IHT purposes at their value as shown in the company records/’books’ or what they could actually be sold for (likely considerably less)?
If they were gifted and the shareholders lived for 7 years would there be any tax liability (I’m pretty sure they would qualify for 100% business property relief)?
Any help would be much appreciated as I struggling to get a clear understanding.
In a nutshell the shares will be valued on an open market value basis for UK tax purposes.
Gifts are typically* immediately chargeable to CGT based on the value of the gift using the above. (*check with a/ your tax adviser with regards possible reliefs).
Typically a potentially exempt transfer for IHT (as long as donor survives seven years) but BPR may apply (again check with a tax adviser and lots of changes on the horizon). If they do become chargeable to IHT the basis is the loss to the estate (i.e. value immediately before then after the transfer - less of an issue when the whole holding is gifted but can be a larger impact than expected if going from a majority to minority basis).
Gifts are typically* immediately chargeable to CGT based on the value of the gift using the above. (*check with a/ your tax adviser with regards possible reliefs).
Typically a potentially exempt transfer for IHT (as long as donor survives seven years) but BPR may apply (again check with a tax adviser and lots of changes on the horizon). If they do become chargeable to IHT the basis is the loss to the estate (i.e. value immediately before then after the transfer - less of an issue when the whole holding is gifted but can be a larger impact than expected if going from a majority to minority basis).
this is where I find this new change will really hurt,,,,
imagine you have a company and are subject to the IHT @20%. That could mean you're paying upfront IHT on the intangible goodwill aspect of the valuation, maybe 3-4 times earnings.
If you assume you pay this, then you'll have to draw an income / dividends from the company to cover this. If you're a higher rate payer, this could be very expensive! At three to four times multiples, it'll likely be more than one years profit to pay the IHT?
imagine you have a company and are subject to the IHT @20%. That could mean you're paying upfront IHT on the intangible goodwill aspect of the valuation, maybe 3-4 times earnings.
If you assume you pay this, then you'll have to draw an income / dividends from the company to cover this. If you're a higher rate payer, this could be very expensive! At three to four times multiples, it'll likely be more than one years profit to pay the IHT?
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