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Inheritance Tax Q&A
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Inheritance Tax Q&A's
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Tax planning for a trust set up to benefit Nephews and Nieces - USERNAME: ellinor
Tax Question: You kindly replied to a question headed 'Using a trust to provide for Nephews & Nieces'. I have loads of questions about this. In the reply you said I would not pay CGT on the cash. What if I put assets other than cash in to trust? Would I pay CGT then? Or the trustees? You say that IHT (inheritance tax, I assume?) would be payable at 20%. When would I have to pay this assuming I had exceeded the £325,000 nil rate band? Or would the nephews and nieces have to pay it (which would be bad as they have no money)? Can they pay say half one year and half the next? And would they have to pay income tax on the income the assets raise? What if the trustees decide that no one would have any benefit from the income in a particular year, would the trustees then have to pay income tax? You say that I would have to make sure I could not benefit. Would I be taken to benefit if I was a trustee? Or if I set up the thing myself and made my partner a trustee? Or if I could decide which nephew/niece was to benefit that year? Would that all be the same for children (e.g. if my brother set up the trust for his children and I added my assets in)? Sorry, so many... . . .
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IHT £250 small gift exemption - USERNAME: burnsd
Tax Question: Hi just a few questions. Re Gifting allowance of £250 per person with no limit, is it possible to use up any retrospective years on this? I know you can go back on the £3,000 one year. Re Gifting allwances, is it allowable to put the gifted cash £250 etc into trust so that you put it in for say 10 people every year, they are beneficieries? If not, can they also be considered as settlors on a trust, all 10+you, and they put it in of their own free will and accord? Thanks! . . .
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IHT for discretionary trust - USERNAME: AChapman200260
Tax Question: My late father passed away on the 27th August 2002. His testamentary Will was not tax efficient as it left everything, except £1,000 to his widow who was also his business partner, and joint owner of the family home. We are currently of the opinion that my mother inherited her late husband's 50% interest in the family home (detached farmhouse), and the farming (formal) partnership on death, on the 27th August 2002, and as such became the sole owner of the detached farmhouse and the farming partnership? However, to try and correct the errors of my late father's testamentary Will both my mother, and myself, completed a Deed of Variation on the 26th August 2004, to redivert all my late father's assets, that were to be inherited both through survivorship and under the terms of his testamentary Will, into a UK based Discretionary Trust and this trust was created with a cash payment of £10.00 (Ten Pounds). The value of my late father's estate, for Probate purposes, was around £480,000 and following the Grant of Probate, we applied for, and duly obtained both Agricultural Property Relief and Business Property Relief, from the Inland Revenue. Due to all the property in the estate not been registered with The Land Registry, and poor legal documentation regarding boundaries, some 9 years later we still have not been able to register the land, and detached farmhouse, with The Land Registry, and distribute these assets to the ultimate beneficaries, the trustees of the UK based Discretionary Trust. As we will be approaching the 10th anniversary of the creation of the UK based, Discretionary Trust on the 27th August 2012, we are concerned that the trustees of the UK based Discretionary Trust may become liable to the payment of a 6% tax charge on the value of the assets in the trust? So would this be 6% of 310 or 6% of £480,000? The above is further confused by the fact that as both Agricultural Property Relief and Business Property Relief was granted the value of my late father's estate was reduced below the £250,000 Nil Rate Inheritance tax allowance applicable at the day of death. So does this mean that the tax due on the value of the UK based Discretionary trust, as at the 27th August 2012, would actually be 0% rather than 6% ? I hope that i have provided all the information required to understand the situation, and I look forward to receiving your reply. . . .
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Help filling in IHT402 - USERNAME: c-273
Tax Question: My mother has just died and I wish to transfer unused nil rate band from my father who died in 1997 to my mother's IHT/probate. IHT402 Q7 requires the value of my father's estate passing under his will but my father's probate just says: It is hereby certified that it appears from information supplied on the application for this grant that the gross value of the said estate in the United Kingdom does not exceed £180.000 and the net value of such estate does not exceed £25,000. So how do I answer Q7? Similarly, since all my father's assets went to my mother under his will and hence were exempt from IHT, no valuations were performed at the time - either his or their shared assets. So how can I fill out IHT402 Q12 & 13? . . .
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Avoiding IHT on UK properties - USERNAME: pjones
Tax Question: Dear Sirs, These are my circumstances: - I am a UK citizen, non-resident and presumably non-dom too as I've been out of the UK for 15 years and no longer required to file a return. - I've successfully managed to become a tax nomad and live in Asia (on a visitor's visa). - I currently own (outright) in my own name a UK house of low value, around £140K. - This house is rented out and I receive around £475 nett per month under the non-resident landlords' scheme. - I own a BVI corporation, of which I am presently the only director, though I plan to change that at some point. - The only 'trade' through the BVI Corporation is invoicing a company in France for professional services that I perform in Asia. - I have a son who is almost 6 years old and has dual nationality, Thai/English. - For the foreseeable future we will most likely continue to reside in Thailand, though for educational reasons the possibility of a return to Europe (most likely UK) exists. - I expect him to be my sole heir (though being in my early 40's and in good health I hope that's not of immediate concern). - I do make voluntary class 2 NICs. I think that covers my relevant circumstances. I am presently buying another home in the UK. The transfer price of which will be £100K. It is a conversion though and that is the price of the derelict shell. I expect to spend another £100K for renovations so expect the value to be at least £200K when done. I don't plan to live in this property any time soon so it will be rented with a forecast income of around £700 per month. So my question is about how best to structure this purchase to be most tax efficient, both now and when the issue of IHT arises. Whilst I realise the 2 properties combined are below the threshold I do expect to buy further properties in the coming years. Thank you for your advice and please feel free to email me if you need clarifications or further details. Yours faithfully, . . .
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Time limit for IHT Double Tax Relief -
USERNAME: jd.ward400
Tax Question: As I understand it ,even though there is a substantial delay in finalising overseas estate tax there will not be a time-limit on obtaining credit for these against UK Inheritance Tax liabilities. HMRC will not grant any provisional credit because the executor (and sole beneficiary) is resident outside the UK. . . .
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Tax on cessation of trust - USERNAME: jacket
Tax Question: My mother set up a Settlor-interested Trust in January 1986. The main objective was to benefit from the IHT 7-year rule, and take funds out of her estate. This objective has long ago been achieved. I am considering winding up this trust. My question is whether there are any benefits from keeping it in existence. This trust pre-dates the Gifts with Reservation rules, brought in later in 1986. Thus, were my mother to place her residence into the trust, I could see that this could have benefit. But that is not going to happen. It being a Settlor-interested Trust, I guess this could allow my mother to add funds to the trust. But this is not going to happen, either. So, I can see no compelling reason to keep the trust in existence. Is there something I am missing? . . .
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Buying a property to avoid IHT - USERNAME: jacques
Tax Question: If (person A) who is a uk resident wanted to buy a house (valued in excess of the iht threshold) in such as way as to avoid iht for their partner who they are not married or in civil partnership with (person B) to enjoy on event of (person A)'s death what would be the best way to make the purchase. I understand there are foundations and trusts that can be set up for doing this kind of thing but know very little about them or the potential pit falls of owning a home though these types of structure. could for example person A set up a trust or foundation to buy a house. and set do it so the house is owned by the trust/foundation. then live in said house with person B and then person B continue to enjoy the benefit of it after death of person A without the house itself actually changing hands and attracting iht ? would there be 'benefit in kind' type taxes to pay by owning a house and living in it in this way ? if person a did have to pay 'rent' to their own foundation/trust how would they be able to re-invest the money in the future and how could they benefit from it without falling into anti avoidance rules etc ? . . .
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BPR on holding company shares - USERNAME: njg
Tax Question: I have a holding company with 4 100% subsidiaries, all trading entities. The Holding company owns one property used in the trade of one of the subsidiaries. The holding company's activities therefore represent a dividend flow up and rent from the subsidiary for the use of the property. The shares in the holding company is owned by individuals. Is 100% BPR affected because of the property being held in the holding company and receiving rent? . . .
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BPR on french leaseback properties? - USERNAME: roderickdhu
Tax Question: Is it safe for a UK based single retiree to invest in french leaseback properties with a view to claiming BPR (business property relief). The property is managed by the leasing company. The property is available for nearly all or all year depending if client wishes to use.It produces income so definitely a business. Meets all the conditions as far as I can see. Does financing make any difference? to eligibility. (Prob buy without.)but intention would be to use equity release on own main residence to raise the funds and lower the estate value as much and as quickly as possible and even further with accrued interest. Please hurry. Client 85. Have you knowledge of any challenges by HMRC in respect of overseas (European) property? . . .
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Gift or loan of cash between family for tax purposes? - USERNAME: carney1
Tax Question: Hi all, I appear to be in 'check-mate' in the following scenario. Could you please let me know if there is any possible way out. Mother in law officially made a very open loan to us of 70,000 GBP in 2006 that was only expected to be repaid if we could afford it and in our own time or in the extreme if she needed it urgently for future health care. The money was used towards the purchase of a property in France. The property was resold at a loss in september 2008 but repayment of the 70,000 GBP was not required(we did not officially repay the money) but given to my wife(only daughter)as deposit on a house in the UK. Parent has very recently died. IHT is going to be due on the estate. Will the 70,000GBP be considered a loan and added to the total estate or can it be considered a gift and so eligible for some taper relief, thus reducing the IHT bill. Hope all this is comprehensible and thanks in advance. A. . . .
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Inheritance tax and non residents - USERNAME: la786
Tax Question: After reading the most recent book for non residents I have the following question If a non resident owned UK property in his/her personal name would he be subject to UK IHT ? Would the answer be different he held cash or an insurance policy only?would there be a difference if he held the property through an. Offshore company? . . .
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IHT planning - USERNAME: Casio
Tax Question: IHT Planning Client (doctor retired), aged 81 years, married, UK domicile has approx. net worth of £3million which includes the following: Main Residence - £1.5m Investment - Business Asset (Doctor surgery) (rented)-£1.0m Stock & shares - £0.5m. Client has wife, 2 sons (one is a doctor) and 1 daughter and five grandchildren. The business asset is used by one of the son - who is a doctor and is using the surgery to practice from. The client would like to: -gift the surgery to the doctor son. -main residence in equal shares to the other two children but continue to live in it. - gift the shares equally to all 3 children -gift £10k each to all 5 grandchildren. Can you suggest pitfalls, if any from the course of action by client. Can you suggest a better alternative which may save tax overall. . . .
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