IHT_Blog

Relief At Tax Tribunal Decision For Business

admin — Sat, 08 Aug 2009 18:04:18 +0000

A recent case relating to Business Property Relief (BPR) brought by the executors of the Fourth Earl of Balfour against HMRC helps clarify the position on relief from inheritance tax for diversified rural businesses.“Whilst government policy has actively encouraged farmers to add other income streams to their core business’ doing so could prejudice future eligibility for BPR,” warns Simon Dixon Smith of Savills in Chelmsford.Generally a farm or estate with an in-hand trading element may qualify for BPR, which reduces the tax payable at death on the market value of the business and its assets by 50% or 100%. This relief is not available where the business consists ‘wholly or mainly… of making or holding investments’ (s105(3) IHTA 1984).Following the case of Farmer v IRC 1999 it became clear that an element of investment activity was acceptable provided however that the trading activity dominated. Certain indicators proving this to be the case were required including capital used, turnover and profit generated, employee and management time spent and the historical connection between the properties.In the case of the Fourth Earl of Balfour, the Revenue disputed the claim for BPR on a number of grounds. The Tax Tribunal had to consider whether the estate was run as a single business for the requisite period (two years) and whether the investment activity dominated.The Whittingehame Estate, home of the Fourth Earl of Balfour, comprised 1907 acres including 665 acres farmed in-hand, 917 acres let out and 308 acres of woods and parkland. There were also 26 houses and cottages and two commercial premises.The Tribunal chair decided that the business was run as a whole despite separate bank accounts and VAT registrations for the ‘farm’ and ‘estate’ elements. One person had overall control and the accounting separation did not impact on day-to-day management.Overall the in-hand farming enterprise turned over more than the investment activities and the balance of time spent was on the farms. The residential components were considered ‘an important part of the overall business’ and had a strong historical association with the estate. The cottages for example were let to tenants who might be able to benefit the estate. The owner’s business skills were required for all parts of the business.The Tribunal chair considered where ‘the preponderance of business activity’ lay and concluded that the letting activity was ancillary to the rest of the business. He did not consider an analytical approach appropriate, rather it was ‘a matter of more general assessment and impression as to where the preponderance of business activity lies’.This decision may yet be appealed by HMRC but advice to landowners must be to deal with all parts of the business in a commercial way for the benefit of the business as a whole, whilst seeking to ensure that agricultural activities dominate.HMRC is constantly seeking to tighten the criteria for the consideration of relief from inheritance tax. This case helps to redress the balance and to show that a prescriptive test for the availability of relief is not appropriate”.

Farmland in Northern Ireland

admin — Wed, 29 Apr 2009 09:40:28 +0000

The House of Lords will soon decide whether to grant the taxpayers in McCall v Special Commissioners leave to appeal against their defeat in February at that hearing the Court of Appeal upheld the Special Commissioners’ ruling last year that agricultural land let in conacre (seasonal grazing) is not eligible for business property relief from inheritance tax. About 30 per cent of Northern Ireland’s farmland is let in conacre.

It’s an ISA TRAP!

admin — Mon, 27 Apr 2009 08:04:26 +0000

Darling is NOT being generous by increasing the ISA limit for older people - he is simply offering a small breadcrumb (tax relief on interest) as a hook to capture Inheritance Tax at 40% (or more) from those unlucky enough to die holding an IHT inefficient ISA.

Over 60 you should start to consider saving 40% IHT rather than a few pence of income tax on almost no interest - I am not suggesting abandoning ISA’s totally, but looking at a more balanced picture of their tax effeciency - especially in these times of low interest.

Steve

Of interest to Financial Advisers only

admin — Sun, 26 Apr 2009 21:13:22 +0000

Check out www.IFAbonus.co.uk and www.APWW.co.uk/FA.htmYou may also be interested to know that you can have sponsored copies of Inheritance Tax Secrets for your own clients as a viral marketing gift. Steve

Welcome to the UK Inheritance Tax Blog

admin — Sun, 26 Apr 2009 19:15:05 +0000

As the author of Inheritance Tax Secrets, I am always looking out for tips and pitfalls to add to the book (which you are MOST welcome to purchase for a modest £14.95 from our home page - value is guaranteed or your money back!) Reading this blog is not an alternative, but it will help you stay up to date if you own the book. SteveStephen Pett, Author www.Inheritance-Tax-Secrets.co.uk