Business Property Relief
Discussion
The Inheritance Tax budget changes applicable to farmers, have been widely explained to all of us.
Valuable asset, minimal income and the 7 year gift rule being of no use, because the parent farmer would become homeless, due to not having a continuing income to pay the required commercial level house rent. Cannot receive an income as employee, sufficient to pay the rent, because that would nullify the 7 year tax exemption.
It appears that a similar situation faces business owners, but I have not seen any mention of this in the media.
Can you business owners please explain more ?
Does this perhaps now apply to all small / medium business enterprises ?
I read a letter today, which to summarize is as follows;
Been in business for more than 50 years and have built one with very little initial capital to a turnover of roughly £30 million.
Now employ more than 80 people and export 25 per cent of our turnover.
Prior to the Budget, I could pass business assets to my family without inheritance tax.
If the proposals become law and I die the day afterwards, my wife could not pay the tax if she liquidated all of our assets and sold the house.
This appears to be an unbelievable situation and a certainly a significant disincentive to start, or grow any UK business.
Someone repeatedly keeps telling us, that the UK economy will grow !
They are really going after IHT.
Another example is if people want to leave the UK and become non-tax residents, previously they were subject to a 15/20 rule, which basically means if you had left the UK for more than 5 years (out of the last 20 years) you would probably not be subject to IHT (there were caveats but that was the simple version). Now if you have lived in the UK all your life and you decide to leave, the government have given themselves a 10 year window to take 40% of your estate when you die.
Another example is if people want to leave the UK and become non-tax residents, previously they were subject to a 15/20 rule, which basically means if you had left the UK for more than 5 years (out of the last 20 years) you would probably not be subject to IHT (there were caveats but that was the simple version). Now if you have lived in the UK all your life and you decide to leave, the government have given themselves a 10 year window to take 40% of your estate when you die.
Jon39 said:
The Inheritance Tax budget changes applicable to farmers, have been widely explained to all of us.
Valuable asset, minimal income and the 7 year gift rule being of no use, because the parent farmer would become homeless, due to not having a continuing income to pay the required commercial level house rent. Cannot receive an income as employee, sufficient to pay the rent, because that would nullify the 7 year tax exemption.
It appears that a similar situation faces business owners, but I have not seen any mention of this in the media.
Can you business owners please explain more ?
Does this perhaps now apply to all small / medium business enterprises ?
I read a letter today, which to summarize is as follows;
Been in business for more than 50 years and have built one with very little initial capital to a turnover of roughly £30 million.
Now employ more than 80 people and export 25 per cent of our turnover.
Prior to the Budget, I could pass business assets to my family without inheritance tax.
If the proposals become law and I die the day afterwards, my wife could not pay the tax if she liquidated all of our assets and sold the house.
This appears to be an unbelievable situation and a certainly a significant disincentive to start, or grow any UK business.
Someone repeatedly keeps telling us, that the UK economy will grow !
I know someone in their 90's whose estate is now facing an additional potential tax bill of several million.
Jon39 said:
The Inheritance Tax budget changes applicable to farmers, have been widely explained to all of us.
Valuable asset, minimal income and the 7 year gift rule being of no use, because the parent farmer would become homeless, due to not having a continuing income to pay the required commercial level house rent. Cannot receive an income as employee, sufficient to pay the rent, because that would nullify the 7 year tax exemption.
It appears that a similar situation faces business owners, but I have not seen any mention of this in the media.
Can you business owners please explain more ?
Does this perhaps now apply to all small / medium business enterprises ?
I read a letter today, which to summarize is as follows;
Been in business for more than 50 years and have built one with very little initial capital to a turnover of roughly £30 million.
Now employ more than 80 people and export 25 per cent of our turnover.
Prior to the Budget, I could pass business assets to my family without inheritance tax.
If the proposals become law and I die the day afterwards, my wife could not pay the tax if she liquidated all of our assets and sold the house.
This appears to be an unbelievable situation and a certainly a significant disincentive to start, or grow any UK business.
Someone repeatedly keeps telling us, that the UK economy will grow !
Failing to see a situation where the IHT tax is more than the inheritance.
wisbech said:
Unbelievable - yes. Say that the house, assets & business is worth 10 million. Ignoring the fact that IHT to a spouse is different, there is about 4m of IHT to pay. Which is somewhat less than the 10 million of assets.
Failing to see a situation where the IHT tax is more than the inheritance.
Overall yes, but there can easily be a situation where the IHT on the business value is greater than the deceased's personal asset value.Failing to see a situation where the IHT tax is more than the inheritance.
Rufus Stone said:
There will be an exemption for inter spouse inheritance. But otherwise, yes it's a huge potential issue.
I know someone in their 90's whose estate is now facing an additional potential tax bill of several million.
I presume they are hoping Labour's assisting dying bill becomes law, so they can die before this becomes active in 2026. I know someone in their 90's whose estate is now facing an additional potential tax bill of several million.
What I hate about Labour's tax changes is their lack of compassion. Like they did for farmers, people have planned based on the rules as they were for decades, and now they are being changed with no taper, or real amount of time to adjust. They have just decided to requisition 40% of these people's small businesses, with no warning, and no mandate from their election manifesto (other than a bland statement, which wasn't clear, about reforming BPR to assist 'genuine business activities').
wisbech said:
Unbelievable - yes. Say that the house, assets & business is worth 10 million. Ignoring the fact that IHT to a spouse is different, there is about 4m of IHT to pay. Which is somewhat less than the 10 million of assets.
Failing to see a situation where the IHT tax is more than the inheritance.
Seems a complete mess, it's hard to see any way a family business could continue if you are essentially paying 4mil to keep it going - how many businesses can absorb that? Which then means it needs to be sold, and by people who are dealing with a death, may lack understanding of business, and need to sell fast...makes them a prime target for people taking a big cut to sell for them, or someone buying at a big discount. You could then have a scenario where true business value is actually a lot lower than the IHT valuation - i.e. 10 mil to keep with 4 mil liability, or 6-7 mil when ultimately sold - how will the gov't handle that? (likely answer, they won't care).Failing to see a situation where the IHT tax is more than the inheritance.
wisbech said:
Unbelievable - yes. Say that the house, assets & business is worth 10 million. Ignoring the fact that IHT to a spouse is different, there is about 4m of IHT to pay. Which is somewhat less than the 10 million of assets.
Failing to see a situation where the IHT tax is more than the inheritance.
The problem with letters/articles like this is that they start with an incorrect premise. There is no proposal to introduce IHT for transfers between spouses.Failing to see a situation where the IHT tax is more than the inheritance.
So the whole point of them if to stoke fear and anger.
Good times ahead for accountants that specialise in business restructuring - there will be quite a few options to avoid/minimise the IHT here.
The 'restructuring' opportunities are very limited for people who are elderly.
What I think it will do is push people in their 60's to sell their businesses and move out of the UK, at a point in their lives when they can pretty certain of surviving the new 10 years rule, so they won't be caught by IHT.
What I think it will do is push people in their 60's to sell their businesses and move out of the UK, at a point in their lives when they can pretty certain of surviving the new 10 years rule, so they won't be caught by IHT.
EddieSteadyGo said:
The 'restructuring' opportunities are very limited for people who are elderly.
What I think it will do is push people in their 60's to sell their businesses and move out of the UK, at a point in their lives when they can pretty certain of surviving the new 10 years rule, so they won't be caught by IHT.
I am not sure that is entirely true. Restructuring can be a lot more than just giving the shares to whoever is going to inherit them.What I think it will do is push people in their 60's to sell their businesses and move out of the UK, at a point in their lives when they can pretty certain of surviving the new 10 years rule, so they won't be caught by IHT.
wisbech said:
Failing to see a situation where the IHT tax is more than the inheritance.
with BPR, on death, the business assets being passed down with have to be valued. It's quite possible to have a situation where the IHT liability based on the valuation will be higher than the net cash assets in the estate. isleofthorns said:
wisbech said:
Failing to see a situation where the IHT tax is more than the inheritance.
with BPR, on death, the business assets being passed down with have to be valued. It's quite possible to have a situation where the IHT liability based on the valuation will be higher than the net cash assets in the estate. Its insane, the single lump sum from a death tax is going to be less than by the steady drip of all the various taxation over the years.
Getragdogleg said:
Which is going to close down and force the sale of a lot of busy small businesses with the loss of workers wages, all the generated tax and VAT and the various other revenue streams the government have put in place for themselves to extract as much out of another's activity as possible.
Its insane, the single lump sum from a death tax is going to be less than by the steady drip of all the various taxation over the years.
You'd have to be mad to close down a business worth that much in order not to pay the tax Its insane, the single lump sum from a death tax is going to be less than by the steady drip of all the various taxation over the years.
It's just hyperbole.
MustangGT said:
Many farmers have taken tax planning advice, for example putting the farm property into a perpetual trust. I do not think it possible to do this now the rules were tightened up some years ago, but, why blame the Government for not taking advice years ago?
It would have been very difficult to plan for IHT on your business as it's only just been announcedI am struggling to get through the noise of all the farming stuff.
Do the same terms apply to BPR -
Ie 50% relief and 10 years to pay? Or is that for farmers only?
MustangGT said:
Many farmers have taken tax planning advice, for example putting the farm property into a perpetual trust. I do not think it possible to do this now the rules were tightened up some years ago, but, why blame the Government for not taking advice years ago?
Why take advice years ago against the perceived risk of an ill-thought through tax? And do you even know how trusts work and the tax involved?Gassing Station | Business | Top of Page | What's New | My Stuff