Inheritance Tax mitigation

The recent announcement that Inheritance Tax (IHT) mitigation via transfers into trust is likely, in future, to be included in the Disclosure of Tax Avoidance Schemes (Dotas) regime is not good news.

Table of contents

Inheritance Tax mitigation

Inheritance tax mitigation

The wealthy have no time to lose in planning their IHT mitigationThe recent announcement that Inheritance Tax (IHT) mitigation via transfers into trust is likely, in future, to be included in the Disclosure of Tax Avoidance Schemes (Dotas) regime is not good news.The Treasury and HM Revenue & Customs (HMRC) proposal is what was expected following the Finance Act 2010’s blocking of two specific trust schemes which dramatically (and arguably artificially) reduced the value of assets gifted into trust.The new government has firmly declared its IHT plans by freezing the inheritance tax threshold, the nil rate band (NRB), for five years, it is backing this approach by supporting legislation to plug as many “leaks” as possible.The consultation document introducing the Dotas requirement does not seem unreasonable in the circumstances, as it does not impact on most conventional IHT mitigation work using the various trust schemes that are widely available.So what exactly is being suggested as far as disclosure is concerned?The new rules will not require any existing schemes used extensively by Bluebond  and well known to HMRC to register, such as flexible and discounted gift schemes, because they are being ‘grandfathered’ into acceptability. The only new trust schemes that have to be registered will be those that involve:

  • chargeable transfers beyond the donor’s current allowances, including any unused NRB. In other words, where property becomes ‘relevant property’;
  • an ‘advantage’ in relation to the IHT entry charge: an advantage being defined as the avoidance, reduction or deferral of a charge.

This avoids any requirement to disclose straightforward situations where an individual simply transfers property into trust and relief, or exemption is available in the same way it would have been had the property been gifted directly to another individual. This is generally the case with most of our of trust-based mitigation arrangements.The government’s proposal is only at the consultation phase so it is too early to be unequivocal about the requirements for plans launched in the future.However, the grandfathering facility will ensure all existing plans of which HMRC is aware and future plans that adopt the same principles as existing plans will be safe. This is the nearest we have ever come to having a blanket approval from HMRC of all existing plans.What does this mean for tax planners and their clients? The proposals are bad news for taxpayers who have been relying on either the indexation of the NRB or, more recently, the Tory commitment to a transferrable £1 million NRB, to lift them out of potential liability. The coalition government has a much less generous approach to inherited wealth than that promised by the Tories.Freezing the NRB for five years when the knock-on impact of quantitative easing is likely to be rampant inflation down the line is serious. Inflation is already rearing its ugly head, no matter what interest rates are doing.Looking further ahead, there has been plenty of speculation that the coalition might continue until another term of government, especially if next year’s referendum delivers backing for the alternative vote electoral model. This will mean the cautious approach to raising IHT allowances will continue.This means taxpayers who are currently close to a potential IHT liability will be severely disadvantaged by the NRB freeze, assuming inflation of 4% over the next two years followed by 8% for three years.A potential liability of nil at the beginning would become a liability of around 40% of £117,814 after five years that is more than £47,000, simply resulting from inflation.Hope for the best but prepare for the worst

IHT planner Charles de Lastic constantly reminds his clients to ‘hope for the best but plan for the worst’. This has served him well over many years of capital tax planning.

The message here is that everyone who, since 2008 when they were given false hope by the last labour goverment, has put off their IHT mitigation planning has no time to lose.Remember: hope for the best but plan for the worst; start your IHT mitigation planning today.

Join our Newsletter

Subscribe and get the latest updates about inheritance tax and Estate Planning into your mailbox.

We help people with over £1 million in current assets pay ZERO in UK inheritance tax

One stop comprehensive specialist advice - Tax, financial planning and legal advice service with 18 years experience.

What our clients say
Read our 114
    

"It is gratifying to finally come across an adviser who gives sensible ongoing advice which is very client focused."

Frank Hibberd

Retired gentleman

"It is nice to know that we can now be certain that our daughter will inherit our money without giving a large slice of it to the government ."

Tony & Sue Perriss

"Everyone's situation is different but having an initial discussion with Charles has really helped me personally navigate what can be a daunting subject."

Bobby Chadda

"I particularly want to thank you for the open and transparent manner in which you have serviced my tax planning needs since I first met you seven or so years ago. In arranging my tax planning through you, I have confidence"

Michael Mahon

Retired gentleman

"Charles was really helpful from the outset and quickly clarified our situation for us... I have used Bluebond for  IHT and other tax advice and they have been very helpful with both. Charles is a very experienced and knowledgeable individual and I highly recommend Bluebond's services."

Sam Attenborough

Retired gentleman

I have used Bluebond for setting up a discretionary trust for my children as well as inheritance tax and estate planning for my home and  other properties. Having searched for years, it was only after meeting and speaking with Charles that I felt confident enough to take these next steps, and I'm very glad I did. His ability to explain complex issues in simple terms and walk you through every step of the process is quite simply unparalleled.

Imran Qureshi

Excellent and comprehensive advice concerning all things financial in one place. Enthusiastic, Educational, Expert, value oriented, Professional and Polite are adjectives that come to mind as well as great attention to detail.

Deirdre Buckley

Inheritance tax is a minefield. Charles de Lastic of Bluebond Tax Planning is the best in the business at helping you to chart the path that is right for you to ensure your estate is structured in the most tax efficient manner.

Nicholas Dickinson

Charles provides clients with valuable insights that clearly demonstrate expertise built over the years. Charles and his team guided us through a estate planning journey and then addressing complex Inheritance Tax matters. They have been very transparent with their advice and cost. Overall an excellent service. Highly recommended

Shailesh Karia

The information contained in this web site is for UK consumers only.  Like most firms of solicitors and accountants, Bluebond Tax Planning is not regulated by the FCA. The content of this website does not constitute FCA regulated financial advice and all content is provided for general information purposes only. Bluebond is not responsible for any action you may take as a result of information on this site. All advice will be delivered on a personal basis once we fully understand your situation and our client agreements have been signed.

Copyright © 2024
Copyright Notice
Legal Disclaimer
Terms & Conditions
Privacy Policy