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Inheritance Tax Article MoneySavingExpert.com Discussion
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hi,
is it normal proceedure to sort out someones private estate and use your £325,000 tax free amount, then if they had a business sort that out and use your £325,000 amount again seperate to reduce the amount of iht payable?
thanx in advance
:beer:0 -
I am confused by your question.
I think it would help if you explained the position in greater detail.
An estate can have two nil rate bands if it is the second death of a couple in a legal relationship, where on the first death everything was left to the surviving partner.
Special rules apply to businesses and their assets.
Over the years governments have realised that killing successful businesses, by charging them up to 40% tax on their assets, does not make sense; it is socialism gone mad.
A notorious example is owning and running a farm, and this might be a partial explanation for the high value of farmland.
If you are in this situation, good professional advice is likely to be needed.
http://www.hmrc.gov.uk/cto/customerguide/page16.htm#a0 -
hi john,
thanx for the reply i will try and explain in more detail.
my uncle recently died recently, he owned his own business, now his personal estate ( not including the business ) totals up to about £10,000 over the iht threshold so not much iht payable, but we have been advised that the business will recieve 100% business property relief. now the main value of the busisness is in investments and money in the bank, will the investments and money in the bank recieve the tax releif or is it just what the business itself is worth ( not including investments & money in the bank ).
hope thats a bit more understanding!
thanx0 -
I don't know. I was only marginally involved in selling a business - my father's, it was a partnership, his parter bought out my father's interest in exchange for an annuity for my mother. I was 21 and far too green to understand what I was signing - the solicitor just sent papers with pencil crosses marked "sign here" and I did as I was told.
How is Uncle's business structured; sole trader, partnership, limited liability private company, etc. etc.
If it is a company, then your uncle and someone else, simply own shares of dubious value, depending on the assets and good will of the business.
What does the business do? HMRC tends not to allow tax relief for "Investment Companies" ie a money box stuffed with investments that are near cash.
If someone does not pick up on this query here in the next day or two, start your own thread using these details.0 -
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hi john,
the company is a ltd company which deals in supplying washer, hoover ect spare parts to the trade and public via mail order.
thanx again for the reply :beer:0 -
thanx for the link jimmo should be of intrest.
if i can understand it
0 -
hi john,
the company is a ltd company which deals in supplying washer, hoover ect spare parts to the trade and public via mail order.
thanx again for the reply :beer:
THEN , assuming you get through that part, there is still the possibility that relief will be restricted as not all of the company's assets were held for use in the actual trade - if you get to this position get professional help - Generally, if all the company's assets are for use in the trade (that is the hoover part side) then you would get 100% relief on the value of the shareholding - but you seem to have been advised that the shares will qualify for 100% IHT. So someone will inherit the shares or the personal representatives will sell the company; or liquidate the company and turn the shares into cash.
While the business is still a Ltd company, it is a separate legal entity and getting the shares doesn't give you the 'right' to the cash in it's bank accounts - you will need to take that out as dividends or as earnings (under PAYE) by becoming a director.
If the personal representatives (PRs) turn it in to 'cash' by selling the shares or breaking up the 'assets' and liquidising the business this is happening during the Administration of the Estate and is after the calculation of IHT (so doesn't change the 100% BPR) which would have covered all the assets on the company's balance sheet.
The sale may result in capital gains tax being due - if the assets are worth more when the PRs sell them than they were at the date of your uncle's death. The PRs will deal with that before they pay out the beneficiaries under your uncle's will.
Regards0 -
taxing thanx m8 for that reply its much appreciated, i have read your post 4 times ( slowley ) and each time understand it a little more
as all this is new to me.
will post the outcome but it may be a while i would think!
thanx again0 -
Read MSE's article on Inheritance Tax with interest, but still not sure about the allowances between husband and wife if one dies first and "hasn't used their whole allowance". What does this actually mean? My father died in 1992 without leaving a will, but after probate the house (which was basically all he possessed)passed to my mother. Does that mean when she dies, her allowance of £325,000 willl be combined with my father's own (unused?) allowance before IT is due? Her estate will be worth, in total around £450,000 so we're looking for ways to reduce liability if we need to. Any advice would be gratefully received.0
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