In the media this week was more talk of inheritance tax reform. The current chat was initiated by the Chancellor asking the Office of Tax Simplification (OTS) to review IHT. The Resolution Foundation is seeking influence by making its own recommendations.
These are centred around a lifetime receipts basis. This means that if you receive assets by gift or inheritance, then these assets should be taxed more, and those assets earned during your lifetime should be taxed less.
The foundation has more controversial plans that will make farmers and small business owners spill their cornflakes not just due to the onset of early stage Dementia.
The plans will introduce a cap on IHT relief for farmland. The super rich, in the UK, invest in land, because it is IHT tax free as long as you actually farm it. As James Dyson would freely admit – becoming the UK’s biggest landowner is a very pleasurable way to receive state subsidy. Firstly the farmer subsidy known as the Basic Payment Scheme worth about £2m per annum or just under £100 per acre, and secondly free of the awkward forty per cent number at death.
The foundation also want a proper farmer test, which might be more difficult to prove, as they come in all shapes and sizes. You would have no difficulty identifying our own local Earl Bathurst for a farmer. His beaten up landrover appears to need a crank handle start, but 25,000 acres of Gloucestershire doff their caps at his appearance – often to the astonishment of uninformed American tourists. However the foundation plan a cap at £5m relief and “80% of assets” to be farming related.
However IHT relief is but a subset of Business relief, and whatever happens to farmers, you can expect roughly the same treatment for owner managed businesses, who also qualify for Business Relief.
Anyway, for younger sons, IFAs and tax planners, we can only advise and dream the what if.
There remains an impressive array of acceptable and non-contrived schemes. Being non-contrived means that the schemes are not notifiable under Disclosure of Tax Avoidance Schemes DOTAS as “contrived” HMRC reportable arrangements).
These products include favourites for IFAs - straight gifts into trust, loan trusts, business relief schemes and pension trusts – these SSAS schemes remain a superlative way to pass assets between generations via notional allocations made at Triennial review time.
The resolution foundation was set up by Clive Cowdery, who founded Resolution group, that bought out Pearl and four other closed life insurance asset companies. He took a number of seminars during his hey-day in 2007 which were notable by his ability to take three or four questions at a time at random from the floor, memorise them and answer them in one reply.