The UK’s complex system of inheritance tax is currently undergoing a major review, with a wide-ranging consultation launched by the Government earlier this year.
Last year alone the treasurer’s coffers were richer to the tune of £5.2bn, thanks to the taxman’s collections in this area, so you can see why it is a top priority for those in the halls of power.
With further changes likely as well as the Government’s recent announcement of a dramatic rise in probate fees, it is possibly as important a time as any for land-owners to seek rounded and good advice on inheritance tax planning.
While those seriously considering how they are going to plan such matters, which may well be 10 or so years into retirement, it is often forgotten how changes in one area of your financial affairs at any time of your life may impact upon another.
For example, as a much younger farmer/land-owner, you may receive advice designed to save you a substantial slice of VAT. But what you may well not be told, or not realise, is such a move could well impact upon your estate and who you want to be your successor.
In short, it is a question of checks and balances – in making sure that you see the larger and longer-term financial picture in whatever you do and that you understand the full consequences of any actions taken, which a good adviser will ensure.
No-one wishes to think about a day when they are not masters of their own destiny, but life does move on, and faster than most of us would like. It is therefore vital, especially for land-owners, to ensure their financial affairs are in order. Unfortunately, there are people out there who do not take the opportunity to look at what can be done and leave their estates less rich as a result.
While there is a threat of changes that may result in some benefits being taken away, at present the 100 per cent agricultural property relief against Inheritance Tax is still available for qualifying assets.
The details of the eligibility criteria and how they can be looked at to best suit your business is something again, that any good adviser will help you with. Tenancy agreements, partnerships, joint ownership, gifted assets and the mix of agricultural and development property that is owned and managed will all affect what action is advised.
For example, when advising an elderly land-owner recently, upon examining their estate and finances, it was discovered that a £50,000 inheritance tax saving could be made immediately. As the years go on, that saving will increase substantially to a point where, in seven/eight years’ time, the inheritance tax liability on death is reduced to nil. This represents a substantial saving and is an example of just what can be achieved.
Partnerships are also a very important area in this respect and can be very beneficial, although they can lead to complications further down the line – complications that can be avoided by planning and having a full understanding at the time of their long-term impact, especially as they will normally involve family members. There are still land-owners who do not understand or realise that, they may be giving away a section of their estate to a non-family partner (or the wrong family partner) with consequences for their overall succession planning.
Diversification is also an issue to be considered. From farm shops to the erection of wind turbines or the development of anaerobic digestion plants and solar farms – these will all affect how inheritance tax planning is conducted.
As any land-owner looks at succession planning and their estate, they must ensure the future is as secure as possible for the next generation – and that can only be properly achieved by taking the very best advice both now and in the future.