Inheritance Tax and busi­ness relief

The Wokingham Paper - - NEWS - With Tim Em­ble­ton from Time Fi­nan­cial Plan­ning

QI un­der­stand I can re­duce my Inheritance Tax (IHT) li­a­bil­ity through busi­ness relief. How does this work? Be­fore we get to the de­tail, I’ll start with a brief his­tory of Busi­ness Relief (BR). BR (pre­vi­ously known as Busi­ness Prop­erty Relief) was in­tro­duced by the 1976 Fi­nance Act. What’s in­ter­est­ing is that the rules around BR have been ex­tended in re­cent years rather than tight­ened and cur­rent Govern­ment pol­icy points to­wards BR be­ing a good thing. The word prop­erty was re­moved from the ti­tle be­cause it’s mis­lead­ing. Most peo­ple think of prop­erty as bricks and mor­tar but ac­tu­ally busi­ness prop­erty is typ­i­cally shares. This means that all you need to do to take ad­van­tage of BR is own shares in a busi­ness that car­ries out a qual­i­fy­ing trade. There are cer­tain re­stric­tions and not all com­pa­nies qual­ify for BR, such as main listed com­pa­nies for ex­am­ple, but it’s pos­si­ble to buy qual­i­fy­ing shares through a fund man­ager. To qual­ify for the IHT ben­e­fits you need to hold the as­set for more than two years be­fore your death and still hold it when you die. Then, that money is zero rated for IHT pur­poses. It’s as sim­ple as that and the beauty here is that the IHT ef­fi­ciency hap­pens in two years, not seven as with the IHT Po­ten­tially Ex­empt Trans­fer (PET) gift­ing rules. Also, the money re­mains yours - you haven’t given it away like you have with a PET or a trust. The BR ar­range­ment often suits peo­ple who are ag­ing and may not have seven years to live or are wor­ried about need­ing money back for care fees. Tim will take a closer look at how your es­tate can ben­e­fit from the main res­i­dence nil-rate band in next week’s Wok­ing­ham Pa­per. COM­PILED BY TIM EM­BLE­TON Time Fi­nan­cial Plan­ning Lim­ited is an ap­pointed rep­re­sen­ta­tive of The On-Line Part­ner­ship Lim­ited which is au­tho­rised and reg­u­lated by the Fi­nan­cial Con­duct Author­ity. Trusts, Es­tate Plan­ning and Tax­a­tion ad­vice are not reg­u­lated by the Fi­nan­cial Con­duct Author­ity

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