Next generation - succession planning

IN challenging times, naturally people think long and hard about their personal finances and reflect on what they can do to help support the next generation.
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Published 8th Jul 2020, 13:59 BST
Updated 8th Jul 2020, 14:49 BST
Vanessa Lee is Tax Partner at BDOVanessa Lee is Tax Partner at BDO
Vanessa Lee is Tax Partner at BDO

Vanessa Lee, Tax Partner at accountancy and business advisory firm BDO, here looks at Inheritance Tax (‘IHT’) after asking what the Government should do to increase support for the younger generation.

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BDO’s recent poll of clients in Yorkshire and the North East asked ‘What should the Government do to increase support for the younger generation?’.

The survey indicated that 38% of people believe the Government should simplify Inheritance Tax (‘IHT’), to allow older generations to pass on their wealth. IHT is currently payable on estates valued at the date of death at the rate of 40%, unless steps have been taken to mitigate overall exposure.

While individuals are calling for tax simplification in this area, IHT reforms may be under the spotlight as part of the Government’s fiscal stimulus package expected next month.

Number 10 was already turning its attention to IHT, even before the pandemic. If we look back to previous recommendations from the All Party Parliamentary Group (APPG) report, which was published in January, some of the changes may include:

1. A 10% IHT charge on all lifetime gifts in excess of £30,000 each year. Except for the spousal exemption, all other reliefs to be abolished, including Agricultural Property Relief (‘APR’) and Business Property Relief (‘BPR’).

2. No tax-free rebasing of assets and the rate of IHT on death to be lowered to between 10% and 20%.

3. The abolition of APR, BPR and all other reliefs (excepting spousal and charity exemption).

4. The ability to pay IHT on death or lifetime transfers in 10-year instalments for land and businesses to be retained, but reformed.

5. Radical changes to excluded property trusts and fundamental changes to the treatment of trusts.

6. Obligation to report lifetime gifts over a de minimus limit - suggested at £10k.

While these previous recommendations are only a summary, and not necessarily an indication of the current Government’s thinking, the potential changes may well lead to individuals expediting succession planning which should always be carefully considered.

Those who have sadly lost loved ones and are dealing with estates should also seek advice to see if refunds of IHT incurred or instalment arrangements can be agreed with HMRC.

* Vanessa Lee is Tax Partner at BDO. She leads the Private Client Tax team across the North and the firm’s UK matrimonial team, email her at [email protected] or call 07796135824

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Related topics:GovernmentNorth East