Tax & IHT guidance - Intelligent Money Private Clients

[Four Seasons Total Landscaping]

IHT question please IM

In a nutshell. My lovely MIL has arranged her affairs so that a six figure sum, part of her estate, will be sheltered from IHT via something called ‘Business Property Relief’. The two years qualifying period will be up in mid October this year.

Sadly she has now had to go into a nursing home, is very poorly and probably won’t survive much longer.

The question is, does she loose the entire relief on that ‘sheltered’ amount should she die before the relevant date in October, or is there some degree of tapering, akin to the usual seven year rule/gifts arrangement with IHT?

TIA

[pingu393]

Four Seasons Total Landscaping said:

IHT question please IM

In a nutshell. My lovely MIL has arranged her affairs so that a six figure sum, part of her estate, will be sheltered from IHT via something called ‘Business Property Relief’. The two years qualifying period will be up in mid October this year.

Sadly she has now had to go into a nursing home, is very poorly and probably won’t survive much longer.

The question is, does she loose the entire relief on that ‘sheltered’ amount should she die before the relevant date in October, or is there some degree of tapering, akin to the usual seven year rule/gifts arrangement with IHT?

TIA

Your question intrigued me, and I found this...

https://octopusinvestments.com/resources/guides/bu...

[Four Seasons Total Landscaping]

pingu393 said:

Your question intrigued me, and I found this...

https://octopusinvestments.com/resources/guides/bu...

Thanks Pingu.

Funnily enough that's who the investments are with. I haven't had time to read the link properly, but the fact that HMRC decide AFTER the death of the holder of the 'BPR-qualifying shares' whether or not they do in fact qualify indicates, to me at least, they will stick rigidly to the 2 year period. Happy to be proved wrong!

[Intelligent Money]

Four Seasons Total Landscaping said:

IHT question please IM

In a nutshell. My lovely MIL has arranged her affairs so that a six figure sum, part of her estate, will be sheltered from IHT via something called ‘Business Property Relief’. The two years qualifying period will be up in mid October this year.

Sadly she has now had to go into a nursing home, is very poorly and probably won’t survive much longer.

The question is, does she loose the entire relief on that ‘sheltered’ amount should she die before the relevant date in October, or is there some degree of tapering, akin to the usual seven year rule/gifts arrangement with IHT?

TIA

Hi,

BPR doesn't have any tapering benefit I'm afraid so it is all or nothing based on the 2 year qualifying period.

Regards

Nik

[Simpo Two]

This was new to me. A friend is clearing his late parents' house - he said that some of the items are 'heirlooms' and therefore IHT exempt. It seems that 'heirloom' is a recognised status. I have nothing in that league but thought I'd mention it for others. How does one obtain 'heirloom' status for things and is it really IHT exempt?

[Intelligent Money]

Simpo Two said:

This was new to me. A friend is clearing his late parents' house - he said that some of the items are 'heirlooms' and therefore IHT exempt. It seems that 'heirloom' is a recognised status. I have nothing in that league but thought I'd mention it for others. How does one obtain 'heirloom' status for things and is it really IHT exempt?

Hi SimpoTwo

This is one that I may stand to be corrected on, but in my experience an "heirloom" is defined as an article that is passed from generation to generation but is only granted that status by family interpretation, HMRC will treat the market value of the heirloom as part of the estate and so it is treated as any other asset when assessing the IHT position of the Estate

Cheers

Nik

[Ali2202]

Of course your Friend's Parents gifted these items to your Friend a long time ago....

[Simpo Two]

Intelligent Money said:

This is one that I may stand to be corrected on, but in my experience an "heirloom" is defined as an article that is passed from generation to generation but is only granted that status by family interpretation, HMRC will treat the market value of the heirloom as part of the estate and so it is treated as any other asset when assessing the IHT position of the Estate

Cheers

Nik

Then 'heirloom' status would appear to be entirely worthless... so they have to pay IHT on the same thing every generation? My spider sense was picking up that 'heirloom' was an HMRC/legally recognised category, requiring historical significance/familial proof etc.

Ali2202 said:

Of course your Friend's Parents gifted these items to your Friend a long time ago....

There's an hereditary title involved and the items in question are indisputably linked to the family going back the the 17th C.

Edited by Simpo Two on Monday 10th May 22:00

[Carbon Sasquatch]

Ali2202 said:

Of course your Friend's Parents gifted these items to your Friend a long time ago....

Unless it appears on an official record - like property or financial investments, I'd have thought most things fall into the 'heirloom' category.

My parent's property etc were subject to IHT declarations, but the vast majority of their belongings went to a charity shop or in a skip - except the jewellery etc that had been gifted 7 years prior.....

[williaa68]

Can I please ask a question about VCTs and CGT pooling rules. I bought a VCT a little over five years ago. I bought the same VCT about six months ago. I would now like to sell the five-year-old VCT. Am I correct in thinking that the usual CGT pooling rules don’t apply and I can do this without losing the tax relief on the most recent purchase?

Thank you.

[Intelligent Money]

williaa68 said:

Can I please ask a question about VCTs and CGT pooling rules. I bought a VCT a little over five years ago. I bought the same VCT about six months ago. I would now like to sell the five-year-old VCT. Am I correct in thinking that the usual CGT pooling rules don’t apply and I can do this without losing the tax relief on the most recent purchase?

Thank you.

Hi williaa68

As far as I am aware there is no minimum holding period for you to gain the CGT relief on a VCT holding so you should suffer no capital gains on sale. The 5 year holding rule applies to Income Tax relief.

You may fall foul of "VCT Refreshing income tax relief" legislation if they view the purchase and sale as being linked.

"A sale is linked where the individual sold shares in the same VCT as the VCT subscribed, or in a ‘successor’ or ‘predecessor’ VCT, and either the subscription is in any way conditionally linked, or the subscription and sale are within 6 months of each other. ‘Successor’ and ‘predecessor’ VCTs are defined in new section 264A(7) ITA 2007."

You may want to double check with the provider before you sell.

Cheers

Nik

[williaa68]

Thats very helpful - thank you. So sounds like i need to wait until six months post purchase before I sell.

[s111dpc]

Hi, I have a question about IHT. My wife’s mum is in her 80’s and in poor health so is starting to think about IHT and whether she needs to do any planning.

She has a property worth £250k and about £160k in cash and assets. She’s aware of the £3k per year allowance and the £250 gifting limit but where’s she’s confused is over the property aspect and whether she can use any of allowance from her late husband who died some 20 years ago.

Her will currently splits her property and assets equally between her three daughters.

Any advice / thoughts gratefully received.

[Intelligent Money]

s111dpc said:

Hi, I have a question about IHT. My wife’s mum is in her 80’s and in poor health so is starting to think about IHT and whether she needs to do any planning.

She has a property worth £250k and about £160k in cash and assets. She’s aware of the £3k per year allowance and the £250 gifting limit but where’s she’s confused is over the property aspect and whether she can use any of allowance from her late husband who died some 20 years ago.

Her will currently splits her property and assets equally between her three daughters.

Any advice / thoughts gratefully received.

Hi s111dpc

As it stands your mother in law will have enough allowance to cover the estate value, £175,000 residence nil rate band and £325,000 nil rate band giving total allowance if £500,000 against an estate value of £410K

If it was required you could apply to use the additional residence nil rate band and any used nil rate band from for your late farther in laws death, but as it stands it wouldn't be required.

Regards

Nik

[s111dpc]

Thanks Nik, that’s what I had assumed having done some reading, but it’s great to have someone far more knowledgeable confirm it

[ben5575]

I have (jointly own) company A that holds shares in another (property SPV) Company B.

For complicated reasons, Company B will be wound up after it has served its purpose with profits distributed via Dividends to Company A (and the various other entities involved in Company B).

What is the most efficient way of taking the money out of Company A? Is my only choice to take dividends and pay 38.1% or is there a way I can use Business Asset Disposal Relief? Can I only use BADR if I dispose of the business rather than winding it up?

Thanks

[B9]

Do you also own company B?

[ben5575]

B9 said:

Do you also own company B?

Company A owns part of Company B rather than me personally. This is something that I can't change.

[Groat]

If you put £100k into a GIA and a year later it had become £110k and you took £10k out how much tax would you pay?

[dingg]

Groat said:

If you put £100k into a GIA and a year later it had become £110k and you took £10k out how much tax would you pay?

Zero, unless you have other capital gains elsewhere, allowance currently 12300