The gift that pays for itself

When you are taking the first steps of opening a new business or moving into new premises, it can be tempting to look to save on costs by not instructing a solicitor to help with negotiating the terms of the new lease. Entering into a new lease is a legal commitment for a number of years and is often a large investment of your businesses resources.

will be. However a Will can be worded to provide that a gift of 10 % of the value of your estate at that time is given to a charity or charities of your choice. The effect of this will be that the rate of Inheritance Tax payable on the whole estate is reduced from 40 % to 36 %.

By Shelley Faulkner,

solicitor with AMD Solicitors

The unfortunate reality is that whilst trying to go it alone in the lease negotiations may reduce those initial outgoings by not incurring “unnecessary” legal costs, it could have longer lasting consequences which you may only realise towards the end of the lease term or when you are looking to move premises.

In same circumstances, it has been calculated that this reduction in the tax bill can serve to leave the estate, even after payment of the gift to charity, with a value as high as if the gift had not been made. Thus the gift can in some cases quite literally pay for itself.

with the lease negotiations they end up with issues further down the line. Whether this is because their lease has not been registered, there are onerous break conditions which need to be fulfilled in order to terminate the lease, a Stamp Duty Land Tax (SDLT) return has not been filed and SDLT has not been paid or the tenant has contracted their lease outside of the security of tenure provisions of the Landlord and Tenant Act without realising the implications of this. In the absence of a schedule of condition evidencing the condition as at the date of the lease, if the property is in a poor state of repair, the tenant could also end up with a large dilapidations bill at the end of the term in order to bring the property up to the standard of repair required by the lease. Dilapidations claims can run into the £1000s and as such this could have a damaging effect on a business’s cash flow.

property to make sure you can lawfully use it for your intended use, but we will discuss with you your longer term plan for the property to ensure you are able to transfer your lease in the future or to ensure that you are able to terminate your lease early in the event you no longer need the premises due to business expansion or contraction.

How leaving money to charity can save you Inheritance Tax

for the distribution of the estate, and the estate can then be divided as if the Will had been made in these terms. A Deed of Variation could therefore provide that 10 % of the estate is to pass to a chosen charity or charities, making the estate as a whole eligible for the reduced rate of Inheritance Tax.

We will also work alongside your accountants to make sure the lease is structured properly and obtain their advice as to whether it is beneficial to have the lease in the name of a limited company or a partnership.

members of the Society of Trust and Estate Practitioners, the leading professional body in this field. We offer a free initial consultation for new clients.

the transaction and to make your move into your new premises as smooth as possible.

Unfortunately, more often than not when tenants choose not to instruct a solicitor to deal

WHILE most of us support a number of charities in our lifetime, it is perhaps not surprising that a smaller number choose to remember a charity in their Will. Clearly the priority for most is to provide for a surviving spouse or children, or to ensure that the family wealth can be passed on to benefit the next generation.

However, government policy is clearly to encourage giving to charity, and a recent development in the law is intended to promote gifts to charity being made by Will. This change may also, on occasion, serve to save Inheritance Tax, or even to create a gift which literally pays for itself.

Reduced rate of Inheritance Tax

Where somebody dies after 6 April 2012 the rate of Inheritance Tax applied to the estate can be reduced from 40 % to 36 % (in other words by 10 %), provided that at least 10 % of the estate passes to charity.

Clearly it is not possible to determine in advance exactly what value the assets you leave by Will will have on your death for Inheritance Tax purposes, or what 10 % of the total value

Even where a Will has not been prepared in these terms, it may be possible to take advantage of this tax break. If the beneficiaries of the estate agree, it is possible to effectively amend the terms of a Will within two years of the date of death. A ‘Deed of Variation’ can be drawn up which sets out the family members’ agreed arrangements

Not only will one of our commercial property solicitors be able to advise you on matters you had potentially not considered, but they will also be able to handle negotiations for you to minimise any stress throughout

This change in the law is clearly very good news both for charities, and potentially for some estates as well. However the detail of the application can be complex. For example, the estate is divided into different ‘components’ depending on how the property will pass to the beneficiaries, in order to calculate whether the 10 % test has been met. Taking specialist advice on the implications for your particular circumstances is therefore essential.

Our commercial property team will review the terms of the lease and advise you on those matters which could have a financial impact upon your business in the longer term. We will ensure your business is protected and we will help guide you throughout the transaction to make sure you avoid any potential pitfalls. We will investigate the title to the

For advice on administration of estates, trusts, wills, powers of attorney and all private client issues, contact Shelley Faulkner, Florence Pearce and the other members of the team on 0117 9621205, email probate@ amdsolicitors.com or call in at 15 The Mall Clifton, or 100 Henleaze Road Henleaze.

If you have recently entered into a new lease without taking legal advice, it is still worth having one of our commercial property solicitors review your lease to advise on any potential issues with it and how you can minimise these in the longer term.

If you have any concerns regarding a new lease that you have entered into or are in the process of negotiating, please contact the commercial property team on 0117 973 3989 or email info@amdsolicitors.com or call into one of our four Bristol offices.

AMD’s team of experienced private client solicitors and practitioners includes full

AMD Solicitors takes pride in sponsoring local, Bristol based charities and this year is very pleased to be supporting the Bristol branch of the Alzheimer’s Society, the local branch of this national charity which works to improve the quality of life of people affected by dementia in Great Britain. For full details of our fundraising activities visit our website www.amdsolicitors.com.

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