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Inheritance tax planning

SCENARIO

Harry has run his own business for 20 years, which is structured as a Limited company. Under Harry’s ownership the company qualifies for Business Property Relief (BPR), meaning it is exempt from Inheritance Tax. When Harry sells the company, the proceeds will no longer qualify for BPR and will be chargeable to IHT at 40%
 
CLIENT OBJECTIVES

Neither of Harry’s children want to take over the business, so he decides to sell the company to a third party, but wants to protect his children’s inheritance.
 
POTENTIAL SOLUTION

Harry can invest the company sale proceeds into a BPR qualifying asset, such as shares in a BPR service, as long as Harry makes the investment into a BPR service within 3 years* of the original company sale, the investment should immediately qualify for BPR.

* The legislation states that BPR qualify assets need to be held for two years out of the last five years, and on death (see section 107 of the Inheritance Tax Act 1984)

This is an example and is for information only and should not be deemed as advice. We recommend that you seek independent financial advice prior to taking any course of action.

Levels and bases of and reliefs from taxation are subject to change and their value depends on the individual circumstances of the investor.

The value of your investment can go down as well as up and you may not get back the full amount invested.


 

If you have a question or just need to talk please get in contact with one of our experienced advisors.
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