Tag Archives: planning
Property prices up in most towns and cities in France
Property prices have increased in over 80% of towns and cities in France in the last year but there is considerable regional variation, the latest figures show. Prices in Bordeaux have increased the most, up by 7.1%, while Strasbourg and Toulouse have seen values rise by 4% and Nice by 3.9%, according to a study […] The post Property prices up in most towns and cities in France appeared first on PropertyWire . Continue reading
When Should You Use BPR To Plan For IHT?
By Tony Mudd on Monday, 7 October 2013 Business property relief isn’t the right tool for everyone planning their inheritance but it’s well worth a look to see whether you might benefit from it. It has occurred to me that anyone who read my previous article Beware Government Bearing Gifts may have been left with the view that investing in businesses that qualify for Business Property Relief (BPR) brings with it such inherent liquidity and investment risks as to make it an area to be avoided. To use an old and often quoted adage that it would be akin to letting the tax tail wag the investment dog. If this was indeed the case then it would only be appropriate to outline the counter arguments; specifically the value BPR qualifying investments outside of an Individual Savings Account (ISA) wrapper can have. It is the case that Alternative Investment Market (AIM) shares qualifying for BPR offer a narrower range of investment options than the wider BPR investments available outside of an ISA wrapper and by definition lower diversification and higher investment risk. However I am going to look here at the tax benefits and the type of investors or situations where this type of investment may be of particular relevance to make my point. To remind readers, investments qualifying for BPR provide the simple but straightforward benefit of being exempt from Inheritance Tax (IHT) once they have been held for two years provided they remain in the hands of the investor at the point they become chargeable ie lifetime gift into trust or on death. Elderly investors or those in poor health Many IHT solutions either require investors to survive a period of seven years or rely on them being able to arrange life assurance. For elderly investors or clients in poor health the fact that the planning involving BPR is effective within two years and/or does not require medicals can be of significant value. Attorneys and deputies Where an investor loses mental capacity their financial affairs will either be dealt with by an attorney or deputy. In these circumstances due to the limitations imposed in relation to lifetime gifts (with the possible exception of Continuing Powers of Attorney in Scotland), the ability for the attorney to invest in the individual’s own hands in a BPR qualifying investment may be the only inheritance tax planning option available. Existing trusts Where the existence of trust assets will trigger a liability to IHT the selection of BPR assets as a trust investment can provide significant tax planning benefits. A liability to IHT could arise in respect of Interest in Possession Trusts or Immediate Post Death Interest Trusts on the death of a beneficiary or in respect of Discretionary Trusts for periodic (10 yearly) charges. Business owners Many investors who also run their own business will be well aware that the business itself offers the perfect shelter from IHT. The reason for this is that the business, assuming it is a trading entity, will qualify for BPR. However if and when the business is ultimately sold the protection from IHT will be lost. Through the use of BPR investments not only does this not need to be the case but the normal two year qualification will also not apply. BPR investments can also be used by husband and wife or those in civil partnerships where only one party needs to survive the two years that the investment is held and in combination with appropriately drafted wills whereby in some circumstances the tax advantages can be doubled. As with AIM shares qualifying for BPR in ISAs BPR investments outside of an ISA wrapper is not a panacea but for some clients in the right circumstances, well worth a look. Continue reading
Ten Tax Planning Points To Raise With Clients
Author: Tim Hills IFAonline | 17 Apr 2013 Tim Hills, financial planner at JLT Wealth Management, offers his tips. Most clients have ample opportunity to keep more of their hard-earned wealth, using well established and non-contentious plans that will never appear on HM Revenue & Customs’ (HMRC) radar. But how many clients use all that is available to them? The following are some questions that may be useful to use with new clients, as well as to reinforce and refine plans for existing clients. 1 Rates Do you both pay the same rate of income tax? If not, is it possible to rebalance incomes so that this can be achieved, thereby making the most of the available personal (and age) allowances? 2 Thresholds If you are fortunate enough to earn over £100,000, what can be done to bring the income level below that threshold? The personal allowance reduces where the income is above £100,000 – by £1 for every £2 of income above the limit. Someone under the age of 65 earning £118,880 will lose their whole personal allowance. 3 Allowances Have you used your full ISA allowances, not just the cash element? If you have no “new” money you wish to commit to your portfolio, do you have any other investments in tax wrappers? While we tend to think of OEICs and unit trusts to ‘Bed&ISA’, a partial encashment from an investment bond (which, of course, notionally suffers basic rate taxation within the fund) is another source to fill ISA allowances. Clearly, care must be taken to avoid triggering tax charges using funds from a bond. 4 Assets Are you considering disposing of any assets and, therefore, incurring capital gains tax (CGT)? Who owns the asset? Transfers between spouses are not disposals for CGT. Plan when to crystallise gains – for example, if a client is considering a gift of property, now may be a good time due to the effect of the market on current values. Do you have losses that may be offset? This is often missed. 5 Pensions Have you made full use of your annual allowance for pension planning? If so, what about the previous three years? Attention needs to be paid to pension input periods and ensuring the client was a member of a pension scheme for eligibility purposes. 6 VCTs, EISs… If you do not wish (or cannot) commit any more investment into pensions, consider enterprise investment schemes (EISs) and venture capital trusts (VCTs). These offer the potential for tax relief on contributions, no CGT and, in the case of EISs, qualifying for business property relief (BPR). The latter means the investment will fall out of account for inheritance tax (IHT), as long as it has been held for two years and remains held at the date of death. The effective savings on income tax, CGT and IHT make such investments look very attractive. Note, however, that these are considered ‘high risk’ investments and care must be exercised. The tax tail should not wag the investment dog. 7 IHT Have you done everything possible to reduce your IHT liability? Gifts out of regular income (as long as they do not affect your standard of living) are not taken into account. Use your annual allowance of £3,000 each and remember you can carry forward the previous year’s unused allowance. Make the maximum gifts on marriage. Consider investments that qualify for BPR that, perhaps some clients , will consider are less ‘risky’ than EIS/VCT. For example, there are a number of schemes that are asset backed, targeting a modest and more predictable performance , the main purpose being BPR qualification. 8 Gifts If you are making gifts to children consider investing into Junior ISAs and/or a stakeholder pensions. In addition to the potential IHT savings available by making gifts, the beneficiaries can then receive the advantage of having their investment in a tax efficient wrapper, rather than simply cash in a deposit account. Tax relief is available for minors who do not pay tax, as they have personal allowances. 9 Process Understand that tax planning is a cyclical process – not an event. Tax legislation and personal circumstances change constantly. Do not be lulled into a false sense of security by thinking that a particular aspect has been dealt with (perhaps some years ago) and it remains completely effective. 10 Check, check and check again Check everything you receive from HMRC – they have been known to get it wrong! Read more: http://www.ifaonline…s#ixzz2QopEAqVo IFA Online – News, blogs and analysis for IFAs. Visit the website now. Continue reading
