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  • somethingcorporate
    • #2
    • 6th Dec 12, 9:23 PM
    • #2
    • 6th Dec 12, 9:23 PM
    Go and see an expert. This requires specialist tax planning - well worth the investment.
    The problem with principles is sometimes they serve no purpose other than to make the holder of said principle righteously indignant. Righteous indignation doesn't get you a refund for your item, but I guess it allows you the opportunity to chunter away on the internet. Fluffnutter
  • purple haze
    • #3
    • 7th Dec 12, 11:12 AM
    • #3
    • 7th Dec 12, 11:12 AM
    Assuming you are looking to reduce the inheritance tax (‘IHT’) liability on your death, and assuming your children are over 18,then placing the properties into trust could be effective tax planning. You and your spouse (if you have one) could not be beneficiaries of the trust so you need to be sure you do not need the rental income.

    The transfer of property to trust would be a chargeable transfer (as opposed to a potentially exempt transfer) so the transfer of any value over 325,000 would be subject to an immediate 20% IHT charge. There would also be ten yearly and exit charges to IHT. Accordingly you might consider limiting the value of the property you transfer to the trust to 325,000 to avoid the immediate, ten yearly and exit charges to IHT.

    If you survive for 7 years after the transfer to trust, the value transferred will be removed from your estate for IHT purposes. Any further transfers to trust within this 7 year period will be aggregated with previous transfers so would trigger an immediate 20% IHT charge and ten yearly and exit charges.

    You can elect to hold over any gain so no capital gains tax should be payable at the time of the transfer.

    The trust will pay income tax at the trust rate (50% on income over 1,000 in a tax year) on the rental income, although your children can claim tax back at their marginal rate if the income is paid to them.

    The most common form of tax planning by property investors is to transfer 325,000 (or the prevailing IHT nil rate band) of property to trust every 7 years.

    Any solicitor who specializes in trusts should be able to assist you.
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