Succession Planning DMH Stallard's Olga Powell considers why succession plans should be top of the agenda for a lot of private businesses as Inheritance tax changes may affect businesses in a way that they do not anticipate. who distrust their heirs more than they dislike the Inland Revenue”.
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n a world which has experienced unprecedented change as a result of COVID-19 and is now beginning to pick itself up one step at a time, it is natural to feel shaken and uncertain about the future. However, people are resilient and so is business, especially family businesses, because they are built around people and those people tend to be instrumental to its success. One matter remains certain, however, and it is the unpopular matter of death duty, aka Inheritance Tax. No doubt, Roy Jenkins, former Chancellor of the Exchequer, would have been disappointed to note that his distinguished political career was being marred by a single quote, yet there it is again and it never gets old “Inheritance Tax is a voluntary levy paid by those
The current successor to the role paints a more trusting picture, but be in no doubt tax revenues are falling, unemployment is rising and even with an optimistic financial outlook, the gaping hole in the government coffers would need to be filled in with something else. While Inheritance Tax has never been the crowning jewel in the Treasury’s books, it is not to be scoffed at with OBR (Office for Budget Responsibility) predicting the tax revenue to rise to £5.3 billion in 2019-20. Add to this a report put together in January 2020 by the All-Party Parliamentary Group on suggested Reform of Inheritance Tax and any weathered tax practitioner would shortlist this to be a clear potential candidate for a tax change alongside business property and agricultural property reliefs. Business Property Relief Business property relief, which was extended in 1992 by John Major to 100%, was supposed to encourage business owners to transfer businesses to their families but instead it resulted in the owners retaining control and continuing to own their businesses until their death because they passed to the heirs free of tax anyway.
“Inheritance Tax is a voluntary levy paid by those who distrust their heirs more than they dislike the Inland Revenue”. ROY JENKINS MP
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Currently, unlisted trading companies, partnerships and unincorporated businesses qualify for 100% relief providing the owner acquired and held those assets for at least 2 years before death or gift; and 50% relief is given to assets and land used in the business by the owner. Investment companies do not qualify although some may qualify in a trading group of companies providing the group has been structured with the right focus on maximising the relief. Agricultural Property Relief Agricultural property relief is less straightforward, but largely applies to farmland and farmhouses on their agricultural value. The relief again is given at either 50% or 100% and a minimum period of ownership of 2 years is also required. While hopes of property development are desirable in normal circumstances, they are not so advantageous when it comes to valuing an
