youngsRPS Rural Brochure - Flipbook - Page 15
As we are all aware, there is no such thing as an
8average9 farming family with essentially three strategic
options available to mitigate potential IHT risk on
values that can, and will, easily exceed the £2.5 Million
personal relief threshold:
Potentially Exempt Transfer (PET)
Creation of Trust ownership structures
Incorporation of the Business (creating a Limited
Company) with land possibly held within a SelfInvested Pension Scheme
There has been historic resistance to both Trusts and
Ltd Companies within the farming community,
primarily as both involve increased and ongoing
administrative burdens and can represent effective 8one
way9 directions of travel due to exit (and possibly
entry) tax implications. However, both have their own
merits that may require reconsideration at the current
time.
PETs are likely to prove the easiest form of property tax
mitigation strategy but come with an effective seven
year 8Life9 rule to avoid IHT penalty and care must be
taken to avoid any perceived Reservation of Benefit
pitfalls particularly concerning, say, the farmhouse.
Until seven years has fully passed following the Gift,
there remains a decreasing risk that a chargeable
interest can still arise which should also prompt need
to consider Life Assurance policies as part of a
mitigation strategy; an approach that was popular up
to the 1980s but has fallen off radar for many.
For most businesses, the likely outcome of future
estate and business planning will realistically involve a
combination of some, or possibly all, of the above with
need to build an effective professional support team
involving not just the accountant and solicitor but land
agent / valuer, bank manager and insurance agent.
Housekeeping Checklist
An easy housekeeping task for everyone to gain the
most from professional support and advice should
include:
Compiling a summary schedule of land ownership
Titles and in who9s name(s) this is registered; a
detail that can often be forgotten.
Checking if all ownership has been electronically
registered. Although the physical area of
unregistered land is much reduced compared to 510 years ago, there are still large tracks of rural land
held in settled ownership which has not yet
triggered compulsory registration to date.
Reviewing the status of loan and mortgage security
charges. These may be excessive for outstanding
debt liability and can impede on the swift transfer
of property until resolved.
Reviewing Partnership agreements for specific
reference to land and property assets. Whilst land
may be jointly owned and farmed by a family
partnership, it does not automatically make it a
partnership asset.
If family partnerships remain undocumented, it is
now more important than ever to address the
situation.
Once your team has been assembled, have open family
discussion in conjunction with professional advisers
and agree a Family Inheritance Action Plan.
Implement changes clearly and effectively without
delay. This might have initial Capital Gains Tax (CGT)
and Stamp Duty Land Tax (SDLT) implications, but
always consider the greater risk posed to the family
business from inaction.
An Inheritance Action Plan is not a one off exercise and
should be reviewed regularly (annually) in conjunction
with Personal Wills moving forwards. Future IHT policy
changes cannot be guaranteed in these uncertain times
but real life changes and the evolution of the family
business will and must continue.
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