Rural. Edition 1, 2019
spouse. This can lead to situations where individuals hold onto assets in later life knowing that will be more tax favourable than gifting during their lifetime, which could then lead to a significant CGT liability. Once the asset is passed through the estate, the value at death becomes the new ‘base cost’ and gifting or selling the asset may then be more tax favourable. This is particularly relevant where assets are passed to a surviving spouse (which is exempt from IHT), or where assets qualify for Business Property Relief (BPR) or Agricultural Property Relief. This can often lead to no tax – either CGT or IHT – being due, and is something that is proposed to change. The idea is complex and would involve something similar to holdover relief (a relief against CGT in certain scenarios), but this would need some careful drafting if it were to come into legislation.
Term assurance plans At present, if a life assurance plan is not held in trust it becomes part of a taxable estate. In a very sensible proposal, the idea would be that term assurance plans would automatically be exempt from IHT without the need for trusts, which individuals (and some insurance companies!) struggle to understand.
The Alternative Investment Market (AIM) shares AIM shares have become increasingly popular with investors, given that they attract BPR after two years of ownership. The report questions this, given BPR was originally designed to prevent smaller businesses being split up upon death (to pay death duties) – a valuable relief for families
to allow businesses to pass down the generations. However, with AIMlisted companies, the relief is slightly at odds with the original intention given investors are ‘removed’ from the business and act as a third-party owner. AIM ISAs (Individual Savings Accounts) have been available since 2013, and as such this area of investing has grown in popularity. This move would adversely affect a number of those who have sought the tax reliefs available from this style of investing. There would also be a knock on effect to the value of those AIM companies, so this would need to be carefully considered before any move could be put in place.
Stuart Coombe
“A common issue with estate planning is people leaving it late in life to start IHT planning.” 21
