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Those looking to pass on farming or business assets should act now to preserve full tax reliefs, which might be cut to help pay for the furloughing scheme, expert lawyers have said. The furloughing scheme introduced to support workers during the coronavirus crisis will now continue into October, and with employees receiving 80% of their wages up to a maximum of £2,500, the payments are said to be costing the Government around £14bn each month. With the Treasury looking to balance the book, specialist lawyers at law firm Irwin Mitchell have pointed out that while focusing on increasing taxes on income would be unpopular, cutting tax reliefs around the inheritance of rural and business assets would be an easier target. Business Property Relief (BPR) and Agricultural Property Relief (APR) are both ways of passing on assets without needing to pay Inheritance Tax (IHT). The reliefs can currently achieve up to a 100% tax saving, meaning assets that fall into these categories - such as family businesses, AIM shares and agricultural land and farm buildings – can be passed on to children tax-free. Kelly Greig, partner and Head of Later Life Planning at Irwin Mitchell said: “At the moment we have the vital furloughing scheme supporting thousands of workers, with the bill being footed by the Government – but this is creating a gap that
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TAKE ACTION NOW TO PROTECT INHERITANCE needs to be plugged, most likely through raising taxes. “We’ve already had some savvy clients getting in touch looking to do any tax planning that they can because they’re anticipating the aftermath of the furlough scheme will change things when it comes to personal tax. “The Government has previously looked at APR and BPR reform as it’s a very generous relief. They’ve already reduced the lifetime allowance for pensions and the tax-free bracket keeps increasing, plus income tax is already high, so I wouldn’t be surprised to see this 100% relief reduced substantially, perhaps to 50% for those assets currently qualifying for 100% or alternatively reducing the net that qualifies for relief. “If they decide to keep those in place, we could instead see the Government take up the Office for Tax Simplification’s recommendation from last year that ending Capital Gains Tax (CGT) uplift on death should go ahead.” Tax, trusts and estates experts at law firm Irwin
Mitchell say there are some effective ways to protect these assets to bank the 100% reliefs now, and suggest delaying could cost thousands further down the line. Kelly explained: “The advice is not to delay when it comes to making the most of the reliefs while they’re still available. It’s a good idea to review your circumstances and look to bank some of those reliefs now, as this could potentially save thousands of pounds in tax in the long run. “For instance, if the CGT uplift does indeed get scrapped, there’s all the more reason to gift to a trust or to members of a family working hard in the enterprise. It may be the case that market values may be lower in an uncertain market, so it’s a good time to gift these assets because of less CGT that would be paid. Trusts are another option as well, but there are plenty of different ways to lock in the bonuses now. “In these uncertain times it’s best to prepare in any way possible, and getting ahead of the curve now will pay off in the long run should APR and BPR reliefs be reduced.”
STICK TO THE COUNTRYSIDE CODE
The CLA has called for walkers escaping to the country as lockdown restrictions are eased to stick to the Countryside Code and respect farmers’ land. With people now allowed to take unlimited amounts of outdoor exercise - and drive to other destinations for that exercise – some farmers have suffered abuse from walkers, had crops trampled and been worried about the safety of livestock threatened by dogs not kept under close control. CLA South East Regional Director Michael Valenzia said: “The CLA recognises the enormous benefits to the nation’s wellbeing from being out in the countryside and close to nature. It is one of the most important ‘public goods’ provided by farmers and landowners. “Visitors should maintain social distancing and not veer off signposted footpaths. Those using the countryside should, especially under current
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circumstances, be conscious that it is also a place of work where the land, livestock, machinery, wildlife and environment must be respected.” Robert Ruck-Keene, who farms near Newport Pagnell in Buckinghamshire, said: “Landowners have a duty of care, but the public must take responsibility too, and I am concerned that those not sticking to permitted rights of way may be injured. “In recent weeks we’ve seen a considerable increase in the number of people going for walks or bike rides where they shouldn’t, from a family of five walking with their two dogs straight through our winter wheat to a cyclist having his lunch on our lawn. “Technology has many benefits, but not all mobile phone apps are accurate, and it means some people get lost or follow incorrect routes.”