This client came to us following a recommendation by their accountant for strategic inheritance tax and capital gains tax planning. The client had accumulated a number of properties over time and wished to pass these onto their children. There is usually friction between inheritance tax and capital gains tax whereby if the assets are transferred during a lifetime, there is a capital gains tax charge. In contrast, if the assets are left in the estate until death, there is an inheritance tax charge at 40%. The other main issue with leaving assets (especially property) within the estate is that the increase in value over time meaning the inheritance tax liability increases over time. We were able to propose a unique tax planning structure which reduced our client’s estate and therefore the inheritance tax liability. At the same time, the tax planning allowed for no capital gains tax to be paid.
Our analysis: Before coming to see us this client had taken advice on setting up a number of trusts which in our view over complicated matters and ultimately ended with a high tax liability than was required.