Estate Planning Guide

125 124 APPENDIX APPENDIX exemption that can be carried forward one year) not otherwise exempt. Subject to certain conditions, the value of agricultural property and business assets, including unlisted shares or securities is reduced by 100% or 50%, according to the nature of the interest transferred, and tax is assessed on the reduced value. Where tax is payable on the death of a person who received property within five years under a chargeable transfer, the tax payable on the second occasion is reduced by ‘Quick Succession Relief’. Relief is applied at 100% if the death occurs up to one year after the previous transfer, 80% between one and two years, 60% between two and three years, 40% between three and four years, and 20% between four and five years. Similar relief also applies to a lifetime charge on the termination of an interest in possession in settled property. The tax payable may also be reduced by double taxation relief. If death duties are paid in another country on property situated there, the foreign duty may be deducted from any United Kingdom tax on the same property. Tax payments may be deferred in respect of Heritage property qualifying for conditional exemption (Heritage property is property which may be conditionally exempted from inheritance tax is it is judged to be 1) land of outstanding scenic or historic or scientific interest; 2) buildings of outstanding historic or architectural interest, along with their amenity land and objects historically associated with them; 3) works of art or other objects of pre-eminent national, scientific, historic or artistic interest). The exemption will be lost if the property is sold or the owner fails to observe the conditions of the exemption. If the owner makes a gift of the property or dies, tax may be payable unless exemption is again claimed. Tax only becomes payable on timber transferred on death if timber is sold or disposed of before it is transferred again on another death. The freezing of the main NRB at £325,000 will increase the importance of estate planning as more estates are likely to be drawn into the IHT net. The introduction of the RNRB will take some estates back out of this net. The RNRB will ultimately rise in line with the Consumer Price Index, but house price inflation above this level may mean that the benefits of this additional NRB will be gradually eroded. The basic rules are that an estate will be entitled to the full RNRB if the deceased: dies on or after 6 April 2017 owns a home, or a share of one, so that it is included in their estate owns an estate which is valued at no more than £2 million and their home, or share of it, is bequeathed to their direct descendants their home is worth at least as much as the RNRB. An estate will also be entitled to the full RNRB when an individual has downsized to a less valuable home or sold or given away their home after 7 July 2015 provided they pass the smaller home and/or the proceeds from the sale to their direct descendants on death. The maximum available amount of the RNRB will increase yearly. For deaths in the following tax years it will be: £100,000 in 2017 to 2018 £125,000 in 2018 to 2019 £150,000 in 2019 to 2020 £175,000 in 2020 to 2021 For later years, the maximum RNRB will increase in line with inflation (based on the Consumer Price Index). Any unused RNRB when someone dies can be transferred to the deceased’s spouse or civil partner’s estate. This can also be done if the first of the couple died before 6 April 2017, even though the RNRB wasn’t available at that time. For estates valued at more than £2 million, the RNRB (and any transferred RNRB) will be gradually withdrawn or tapered away. If the net value of the estate (after deducting any liabilities but before reliefs and exemptions) exceeds £2 million, the RNRB will be tapered away by £1 for every £2 that the net value exceeds that amount. For example, if a couple had an estate worth £2.2 million, they would lose £100,000 of their RNRB, increasing their IHT bill by £40,000. If they were to bring their estate back under £2 million, the full RNRB could be claimed. The RNRB cannot apply to gifts made during someone’s lifetime. Where all or part of the RNRB might be lost because the deceased had downsized to a less valuable residence, disposed of part of a property including garden or grounds, or a share in it, or had ceased to own a residence, the lost RNRB will still be available. The RNRB would apply where the residence is no longer owned on or after 8 July 2015, however there is no further limit on how long the downsizing occurred before death. The rule is that the assets (the value of the house) have to be left to direct descendants and on death continue to apply to the proceeds of sale. Contact details blackfinch.com enquiries@blackfinch.com 01684 571255 canadalife.co.uk ican@canadalife.co.uk 01707 422999 downing.co.uk laurence@downing.co.uk 020 7416 7780 foresightgroup.eu sales@foresightgroup.eu 020 3667 8199 theingeniousgroup.co.uk hello@theingeniousgroup.co.uk 0207 3194291 oxcp.com info@oxcp.com 01865 860760 pumainvestments.co.uk info@pumainvestments.co.uk 020 7408 4070 time-investments.com questions@time-investments.com 020 7391 4747 triplepoint.co.uk Caroline.Addai-Bempah@ triplepoint.co.uk 020 7201 8990 wayinvestments.co.uk advisersupport@waygroup.co.uk 01202 890895