Probate expert Professor Lesley King analyses the two recent appeals involving the RSPCA: the Gill case regarding the validity of an elderly lady’s will, and the Sharp case regarding construction of a will leaving a nil-rate-band legacy.
Sources:
STEP
The Law Gazette
This week the STEP Journal give their analysis of tax implications under the new coalition government.
Read the full article here or see the excerpt below
“Both Conservatives and Liberal Democrats were obliged to drop some of their campaign promises when agreeing to form a coalition government on Tuesday.
Tory plans to raise the inheritance tax nil rate band to GBP1 million have been shelved for the duration of this parliament. The LibDem proposal for a “mansion tax” on houses worth more than GBP2 million has been dropped, probably for ever.
However the most significant news is that the new chancellor, George Osborne, will soon present an emergency Budget raising capital gains tax rates to levels “similar or close to those applied to income” – that is, from 18 per cent to 40 per cent, in line with the Liberal Democrats’ election manifesto.
The new rate will, however, only apply to non-business assets, and there are to be “generous exemptions for entrepreneurial business activities”. This means shares, second homes and buy-to-let property will be the main targets of the tax.
Newspapers, including the Financial Times, are predicting heavy selling of these assets before the new rate comes into force. It is not yet clear whether the change will be implemented immediately or even retrospectively.
“The hope is that any change will not be before 2010/11 to allow sensible business and tax decisions to be made in good time”, said Francesca Lagerberg, head of tax at accountants Grant Thornton.
Another ominous passage in the coalition’s joint policy statement promises that “all efforts will be made to tackle tax avoidance, including detailed development of Liberal Democrat proposals.
“This could include a campaign proposal by Vince Cable (now a minister) for a general anti-avoidance provision for corporation tax.
Before the election the party also advocated closing “loopholes” such as preventing the avoidance of stamp duty land tax by transferring property into offshore trusts, restricting non-dom status to a maximum of seven years, and stopping business owners paying themselves in dividends taxed at 18 per cent.
The Tories’ proposal for limited transferability of personal tax allowance between spouses has not been dropped, but Liberal Democrat MPs will be allowed to abstain on budget resolutions dealing with it.
The emergency budget will appear before the end of June, aided by an independent Office for Budget Responsibility.
A full spending review will be held during the summer, reporting in autumn. This will follow a “fully consultative process involving all tiers of government and the private sector”, says the new government.”
Source
STEP reports that a further 650,000 families could be brought into the inheritance tax net under a Labour government, after last week’s budget froze the nil rate band at GBP325,000 until at least April 2014.
Read the full article on the STEP Journal or read the extract below
The 650,000 figure comes from Frank Nash of accountants Blick Rothenberg, quoted in the Daily Telegraph. Nash says the freeze could cost a couple an additional GBP37,000 in IHT in real terms over four years, if inflation continues at around 3 per cent.
It will particularly affect couples whose joint assets are worth over GBP650,000, said Richard Mannion of accountancy firm Smith & Williamson.
“With the IHT rate currently at 40 per cent this may result in a significant further financial burden, especially for those whose wealth is wrapped up in property with little liquid cash”, he said. “The freezing of the nil rate band does create clear political water between Labour and the Conservatives.”
John Richardson, head of advice policy at Towry Law, said the long freeze would lead more families to consider estate planning opportunities, and more trustees to consider tax-efficient investment structures to minimise the ten-year anniversary charges.
As already reported, the Treasury will this summer work out a method of bringing inheritance tax planning into the list of activities that have to be reported to HM Revenue & Customs as tax avoidance schemes – the the Disclosure of Tax Avoidance Scheme (DOTAS) rules.
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