By Lauretta McGeown, Associate Director, Tax at Grant Thornton in Belfast
Times of turmoil and uncertainty are inclined to push us to consider our current circumstances and our plans for the future. The Government financial support being offered during the coronavirus pandemic is essential and much welcomed, but will need to be paid for at some point in the future. It is probably safe to say that tax rates are more likely to go up than come down in the future.
Two reports published before the pandemic outbreak suggested changes to the current inheritance tax reliefs available – one from the Office of Tax Simplification, the other from the All-Party Parliamentary Group for Inheritance and Intergenerational Fairness.
Some of the recommendations in these reports would radically curb the inheritance tax reliefs currently available. Whilst the proposals have not yet been implemented, it is not inconceivable to speculate that in the post-pandemic economy every avenue to raise revenues will be examined.
The current rate of inheritance tax on death is 40%, and on chargeable lifetime gifts is 20%. Lifetime gifts of non-cash assets will be a deemed disposal for capital gains tax purposes, and this is often a major consideration when undertaking estate planning.
The main rate of capital gains tax is currently 20%, which is low compared to historical rates and those in other countries. Increasing this rate could be another avenue explored by Government in due course.
What can be done to consolidate and protect family wealth already accrued, and is there any way to find a sliver of solace in the current economic situation? Several opportunities may exist as outlined below.
Use the fact that asset values are temporarily deflated to your advantage, by reducing your estate through making lifetime gifts to individuals, or into Trusts, if control is to be maintained. The capital gains cost, if any, of the asset disposal should be reduced.
Take the opportunity to look at business succession planning. Is it the time to bring in the next generation, or key staff? Should you consider a gift of shares or even a share scheme? Perhaps there is an opportunity for consolidation by buying-out minority shareholders.
Examine assets that currently attract inheritance tax business property relief, or agricultural property relief. Is now the time to gift, in order to secure those reliefs in case they are curtailed in the future?
Check whether the relative values of trading versus non-trading company assets now strains the company’s trading status for the purposes of inheritance tax reliefs.
Investigate whether capital losses can be crystallised.
In the midst of all this social and economic turmoil it may be a good time to get your affairs in order. Have that discussion with your trusted advisor circle or accountant; solicitor; and financial adviser, who will give the expert advice appropriate to your particular circumstances, and together you will come up with a holistic plan to protect your family’s financial future.
For further information or advice, Lauretta McGeown can be contacted at lauretta.mcgeown@ie.gt.com
Grant Thornton (NI) LLP specialises in audit, tax and advisory services.