Inheritance Tax (IHT) Taxpayers Overpay £1,017 Million

A recent report has found that nearly one in eight adults in the UK has a personal wealth in excess of £100,000, which includes savings and investments and the family home. Worryingly, it shows that these individuals are more at risk of paying over the odds for tax and are putting a staggering amount into the hands of the taxman every year. This could easily be avoided with some tax planning advice.

If you have assets over £250,000 individually or as a couple, plan the inheritance for your family. An extra £1,017m currently lost to the taxman could go to your chosen heirs by planning to avoid IHT liabilities. Cash is lost through not writing death benefits in trust, not realising the IHT-free allowance of £250,000 to which we are all entitled, and by simply not making a will.

Why don’t you “dust down” the will, list out your assets and have a preparatory IHT planning session with us?

Alternatively use the Inheritance Tax Calculator on our website, www.nunn-hayward.com, to assess your exposure. Then call your usual contact or Stephen Cook, Tax Partner.

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The Eversden Case – Can I really give something away and yet still benefit from the use of it?

The purpose of this article is to alert you to the possible Inheritance Tax planning opportunities, which arise from the recent High Court decision in the case of IRC v Eversden.

More particularly, the case offers a potential solution to one of the intractable problems of recent years, namely how to give away assets to reduce a potential Inheritance Tax exposure effectively whilst continuing to be able to benefit from the gifted assets. Otherwise known as having your cake and eating it! As you may know, it is the tax effect of the gift with reservation of benefit provisions which preclude individuals from giving the family home to their heirs whilst continuing to live there or from giving away investment assets but continuing to receive the investment income or any share of the ultimate disposal proceeds.

The principle in the Eversden case is that a gift into a trust for one’s spouse will not fall foul of the “gift with reservation of benefit” provisions even if the donor subsequently benefits from the trust. In other words, the case offers a potential solution to the gift with reservation of benefit problem. It is difficult to generalise and every case needs to be looked at carefully but there does appear to be scope for effective planning here.

We have taken the advice of a leading independent tax consultancy who have indicated that they do not expect the case to be reversed on appeal. They also think that action taken now is unlikely to be caught by any future legislative change. The appeal to the Court of Appeal is expected to be heard in July 2003. Some commentators think it unlikely that the forthcoming budget (March 2003) will contain changes to the law but one can never be certain.

In summary, we believe you should be aware of this potential tax planning opportunity, given the significant amounts of Inheritance Tax, which might be saved.

If you are interested in exploring this further, please contact Steve Cook, Tax Partner or your usual contact.

Are you aware that banks and building societies are required to provide full details of every offshore account held including names, addresses and bank account details!

The last three months have seen substantial activity in the investigation world. There has been the disclosure that the Bank of Ireland in Jersey has given the Inland Revenue details of UK-resident investors with offshore trusts. Although it was initially reported that up to 9,000 names had been passed to the Inland Revenue, it is understood that the number is in the region of 300 to 400. All those named can expect attention from the Inland Revenue – it will just be a question of how and when.

This only goes to illustrate the ethos of all Nunn Hayward Partners that tax planning, especially using offshore structures, must be done assuming there is or can be full disclosure to authorities.

If you (or a friend!) has any concerns directly or indirectly arising from the above, please call your usual contact or Stephen Cook our Tax Partner.