Viva Brighton Issue #82 December 2019

ADVERTORIAL
DOES YOUR
CAPITAL GAIN
HAVE A HOLD
ON YOU?
Tax planning is tricky at the best
of times. Camilla Bishop looks
at one option to consider when
radical tax reform may emerge
from political turmoil.
The Conservatives are toying with abolishing
Inheritance Tax (IHT), while Labour contemplate
introducing a tax on all gifts – two opposite ends
of the spectrum. What to do in the meantime?
You may have an estate over the IHT threshold,
yet struggle to make any lifetime gifts without
triggering Capital Gains Tax (CGT). For example,
you may have investments or property you’d like
to pass on to the next generation; to do so would
crystallise the gain and trigger tax between 10%
and 28% – but by making a gift, you have no sale
proceeds to pay the tax with! With IHT being
considerably higher – 40% of the entire value
of the asset, not just the gain – if you keep the
asset in your estate until death, you will suffer
40% IHT instead. Given the choice, I’d pay the
CGT; if I could defer it, even better.
Creating family trust
A technical answer to the conundrum is to use
CGT holdover relief combined with the creation
of a family trust. In certain circumstances, this
planning can allow you to transfer assets up to
£325,000 without triggering any CGT – the CGT
being deferred until the asset is actually sold.
Such a transfer will start the seven year clock
for IHT, and can significantly reduce your IHT
exposure overall.
This option will not necessarily be available in
years to come if the rules on IHT, gifting and
deferring CGT are reviewed; any changes to
IHT will likely have knock-on effects for the CGT
regime too.
None of us has a crystal ball, but it is worth
considering the use of CGT holdover relief while
it still exists. It is just one of the tools we can use
in the mitigation of IHT generally; if you need
specialist IHT and CGT advice, please get in
touch.
Camilla Bishop is a partner at
DMH Stallard’s Brighton office
specialising in estate planning.
You can contact her on
01273 329833.