BR Guide Second Edition

72 THE PRACTICAL ROUTE TO BR CGT and Income Tax Relief Investors will need to declare any income they receive from their investment as part of their tax return, and if they were to sell the shares at a profit they may be liable for CGT, depending upon their personal circumstances. Likewise, if the shares are inherited, when a beneficiary sells shares that previously qualified for BR for IHT purposes, they will be liable for any CGT due. Any gain they make will be based upon the difference between the value of the shares at the death of the original investor, and the proceeds from the disposal made by the beneficiary. Depending upon their personal circumstances, the beneficiary may also be subject to income tax on any income they earn while holding the shares. In the right circumstances, BR assets which also qualify for the Enterprise Investment Scheme (EIS) and Seed EIS (SEIS) can be used to offset income tax and CGT and defer CGT liabilities. Claiming the Relief BR has to be applied for by the deceased investor’s estate or by the individual in most cases of lifetime transfers and cannot be guaranteed upfront (unless there has been a successful lifetime transfer). To obtain IHT relief using BR, the executors of the estate will need to fill in both form IHT400 (Inheritance Tax Account) and schedule IHT412 (Unlisted stocks and shares, and control holdings) or schedule IHT413 (Business or partnership interests and assets). To download form IHT400 (Inheritance Tax Account), go to: https://www.gov.uk/government/uploads/system/uploads/ attachment_data/file/622901/IHT400_06_17.pdf To download schedule IHT412 (Unlisted stocks and shares, and control holdings), go to: https://assets.publishing.service.gov. uk/government/uploads/system/uploads/attachment_data/ file/774315/IHT412.pdf To download schedule IHT413 (Business or partnership interests and assets), go to: https://www.gov.uk/government/uploads/ system/uploads/attachment_data/file/373593/IHT413.pdf Working with Vulnerable Clients Advising Vulnerable Customers The Financial Conduct Authority has been consistent in its views around ‘treating customers fairly’ (as referred to in the FCA's principles 6, 7 and 9) across all of its regulated activities. In particular, the FCA has repeatedly emphasised the importance of firms exercising extra care where consumers may be vulnerable, and to also pay attention to the indicators of potential vulnerability. The term ‘vulnerable customer’ has historically been difficult to define, as it can potentially refer to any number of problems a client might be facing, potentially causing a disproportionate regulatory burden on advisers. Since 2015, the FCA has used the following as its definition of a vulnerable customer: This is a broad definition and can encompass a number of factors. Some examples include: SCHEDULE IHT412 applies if BR is being claimed on shares (including shares listed on AIM and shares traded on OFEX). SCHEDULE IHT413 applies if BR is being claimed on an asset used in a business or if the deceased owned a business. These must be sent to HMRC within 12 months of the end of the month of death. Failure to do so may lead to a penalty of £200. Should the delay extend to two years after death, an additional £3,000 could apply. For unlisted share valuations, the BR should be valued on an open market basis. AIM share valuations can be found by visiting the AIM pages of the London Stock Exchange website: http://www.londonstockexchange.com/companies- and-advisors/aim/aim/aim.htm A vulnerable consumer is someone who, due to their personal circumstances, is especially susceptible to detriment, particularly when a firm is not acting with appropriate levels of care. FCA examples of risk factors for vulnerability • low literacy, numeracy and financial capability skills • physical disability • severe or long-term illness • mental health problems • low income and/or debt • caring responsibilities (including operating a power of attorney) • being ‘older old’ for example over 80, although this is not absolute (may be associated with cognitive or dexterity impairement, sensory impairments such as hearing or sight, onset of ill-health, not being comfortable with new technology) • being young (associated with less experience) • change in circumstances (e.g. job loss, bereavement, divorce) • lack of English language skills • non-standard requirements or credit history (e.g. armed forces personnel returning from abroad, ex-offenders; care-home leavers, recent immigrants) SOURCE: FCA OCCASIONAL PAPER NO.8 7.4 7.5