BR Guide Second Edition

89 88 APPENDIX APPENDIX An estate can have reduced rate of IHT of 36% on some assets if the deceased leaves 10% or more of the ‘net value’ (after deducting IHT exemptions, reliefs and the NRB) to charity. People given gifts by deceased parties might have to pay IHT, but only if the deceased gives away more than £325,000 and dies within seven years. Examples of gifts can be: » transfers to a company or a trust (except a disabled trust). These are immediately chargeable (chargeable lifetime transfer) if the asset being transferred is worth more than the available NRB, unless an exemption applies. (Every seven years a full NRB will be available to make chargeable lifetime transfers). » exempt gifts which will be ignored both when they are made and also on the subsequent death of the donor, e.g. gifts to charity. » any other transfers will be potentially exempt transfers (PETs) and IHT is only due if the donor dies within seven years of making the gift (this is termed a failed PET and is subject to taper relief depending on how many years before the donor died the gift was made). » between spouses – these are generally IHT exempt if both spouses or civil partners are either UK or non-UK domiciled. » small gifts of up to £250 per tax year, per recipient. These are IHT exempt up to a total of £3,000 per tax year. Unused annual exemption can be carried forward to the next tax year. » gifts in consideration of marriage made by a parent of up to £5,000 are exempt, with lower limits for other donors. Trusts Business Relief (BR) Agricultural Property Relief Other Useful Information For detailed information on HMRC’s specific approach to BR, go to Section 11: relief for business property, the Valuation Office Agency’s (VOA) technical manual relating to IHT. Visit: https://www.gov.uk/guidance/inheritance-tax-manual/ section-11-relief-for-business-property Listed Shares Check what is classified as a recognised stock exchange here: https://www.gov.uk/guidance/recognised-stock- exchanges Pre-clearance Qualification is not always clearcut and pre- clearance from HMRC (as is common with EIS) is often unavailable. However, in relation to certain lifetime transfers, a business owner can apply to HMRC to see whether BR is potentially available in respect of business property. This is a non-statutory procedure and is only available in cases where there is a material uncertainty as to the status of property. For information about HMRC clearance services, visit: https://www.gov.uk/guidance/non-statutory- clearance-service-guidance HMRC Guidance on the Meaning of Investment https://www.gov.uk/hmrc-internal-manuals/shares- and-assets-valuation-manual/svm111160 » gifts out of income are exempt from IHT. These should be habitual and must not result in a fall in the standard of living of the donor. An example would be payments of annual premiums on life insurance policies. » family maintenance gifts such as the transfer of property made on divorce under a court order, or maintenance of a dependent relative are also IHT exempt. » gifts to political parties benefit from IHT exemption when the donation is to a political party that, at the last election preceding the transfer of value, had at least two MPs or one seat and 150,000 votes. » gifts for national purpose can be exempt from IHT when they pass to a new owner that is an institution that exists to preserve a collection of scientific, historic or artistic interest for the public benefit, or any library serving the needs of teaching and research at a UK university. Trusts will generally take assets held within an individual’s estate outside the estate for IHT purposes (provided the donor does not obtain any benefit or enjoyment from the trust), reducing the size of the estate and the assets on which IHT is payable. This applies to provide 100% relief where the business is undertaking qualifying activities, where the owner of the shares has owned them for two years or more. Reinvestment relief also applies. This is available on the transfer of agricultural property so long as various conditions are met. This relief is not considered as part of this guide. Specialist advice should be taken, in particular because APR takes precedence over BR. Charity Gifts Claim your CPD This guide is accredited for structured CPD by the CISI, PFS and CII and readers of the guide can claim one hour of CPD for each hour spent reading the guide, up to a total of four hours. In order to claim structured CPD, readers will need to complete a short online test. Go to intelligent-partnership.com/cpd for more details on claiming CPD. Provide Feedback Intelligent Partnership actively welcomes feedback, thoughts and comments to help shape the development of this guide. This guide is produced on a regular basis. Feedback can be given on the website or via email: • Intelligent-partnership.com/feedback • Guides@intelligent-partnership.com Steps After Reading Participation and feedback are gratefully received