We're aware that some users are experiencing technical issues which the team are working to resolve. See the Community Noticeboard for more info. Thank you for your patience.
📨 Have you signed up to the Forum's new Email Digest yet? Get a selection of trending threads sent straight to your inbox daily, weekly or monthly!

Octopus Inheritance Tax Service

Options
2»

Comments

  • Thanks Harry, can't believe that Octopus have 75% of the VCT market though, there are many other significant players out there.
  • Albermarle
    Albermarle Posts: 27,739 Forumite
    10,000 Posts Seventh Anniversary Name Dropper
    The scheme could probably be best considered for those in ill health, or those who have a good reason to want to retain ownership of their assets in their lifetime.  

    You could also add those with a large potential IHT liability ?as presumably if the potential IHT liability was less than say £100K tax  it would probably not be worth the bother and cost of getting involved in such schemes ?

  • aroominyork
    aroominyork Posts: 3,301 Forumite
    Part of the Furniture 1,000 Posts Name Dropper
    edited 4 October 2020 at 11:44AM
    Many thanks for your detailed reply, HappyHarry. 

    If the govt withdrew the IHT benefits of this type of scheme - which, given they are looking at all options for new tax raising measures, must be a possibility - is there a significant risk of a high volume of withdrawal requests, potentially leading to gating/delays and Octopus potentially having to fire-sale the assets at low prices?
  • macman
    macman Posts: 53,129 Forumite
    Part of the Furniture 10,000 Posts Name Dropper
    Yes, that is always going to be a hazard of these types of IHT avoidance schemes. The legislation eventually catches up with them, as it did when the focus was on using EIS. 
    No free lunch, and no free laptop ;)
  • HappyHarry
    HappyHarry Posts: 1,796 Forumite
    Tenth Anniversary 1,000 Posts Name Dropper
    Many thanks for your detailed reply, HappyHarry. 

    If the govt withdrew the IHT benefits of this type of scheme - which, given they are looking at all options for new tax raising measures, must be a possibility - is there a significant risk of a high volume of withdrawal requests, potentially leading to gating/delays and Octopus potentially having to fire-sale the assets at low prices?
    In theory, yes, if the government got rid of BPR then they would be no point investing further in these schemes, the assets invested in would still exist however, and so the liquidity issue would come in, rather than a fire-sale of assets.

    In reality, no government is going to get rid of BPR. This is what small business rely on to keep going past the death of their owner.  Imagine a 50 person business owned by the founder who then dies. Without BPR, 40% of the value of the business would be due in IHT. This would likely mean the closure of the company, and redundancy for the workers. It would be a regressive tax policy with consequences that would be unpalatable even to the far left of our political parties. 
    I am an Independent Financial Adviser. Any comments I make here are intended for information / discussion only. Nothing I post here should be construed as advice. If you are looking for individual financial advice, please contact a local Independent Financial Adviser.
  • aroominyork
    aroominyork Posts: 3,301 Forumite
    Part of the Furniture 1,000 Posts Name Dropper
    Many thanks for your detailed reply, HappyHarry. 

    If the govt withdrew the IHT benefits of this type of scheme - which, given they are looking at all options for new tax raising measures, must be a possibility - is there a significant risk of a high volume of withdrawal requests, potentially leading to gating/delays and Octopus potentially having to fire-sale the assets at low prices?
    In theory, yes, if the government got rid of BPR then they would be no point investing further in these schemes, the assets invested in would still exist however, and so the liquidity issue would come in, rather than a fire-sale of assets.

    In reality, no government is going to get rid of BPR. This is what small business rely on to keep going past the death of their owner.  Imagine a 50 person business owned by the founder who then dies. Without BPR, 40% of the value of the business would be due in IHT. This would likely mean the closure of the company, and redundancy for the workers. It would be a regressive tax policy with consequences that would be unpalatable even to the far left of our political parties. 
    Is there a way the govt could retain BPR for genuine owners/family of businesses but not make the scheme accessible to outside investors?
  • HappyHarry
    HappyHarry Posts: 1,796 Forumite
    Tenth Anniversary 1,000 Posts Name Dropper
    Many thanks for your detailed reply, HappyHarry. 

    If the govt withdrew the IHT benefits of this type of scheme - which, given they are looking at all options for new tax raising measures, must be a possibility - is there a significant risk of a high volume of withdrawal requests, potentially leading to gating/delays and Octopus potentially having to fire-sale the assets at low prices?
    In theory, yes, if the government got rid of BPR then they would be no point investing further in these schemes, the assets invested in would still exist however, and so the liquidity issue would come in, rather than a fire-sale of assets.

    In reality, no government is going to get rid of BPR. This is what small business rely on to keep going past the death of their owner.  Imagine a 50 person business owned by the founder who then dies. Without BPR, 40% of the value of the business would be due in IHT. This would likely mean the closure of the company, and redundancy for the workers. It would be a regressive tax policy with consequences that would be unpalatable even to the far left of our political parties. 
    Is there a way the govt could retain BPR for genuine owners/family of businesses but not make the scheme accessible to outside investors?
    The investors are genuine owners. 

    Again, theoretically yes, but it means discriminating against certain business owners, many of whom will genuinely be taking some risk.

    There are far easier targets to go for. BPR cost the government £710m according to this link (https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/737597/Dec_17_Main_Reliefs_Final.pdf)
    and I expect that the majority of that will be for "genuine" owners. Compared to the £24bn  pension scheme tax relief costs, I can't see BPR being very high on the agenda.
    I am an Independent Financial Adviser. Any comments I make here are intended for information / discussion only. Nothing I post here should be construed as advice. If you are looking for individual financial advice, please contact a local Independent Financial Adviser.
Meet your Ambassadors

🚀 Getting Started

Hi new member!

Our Getting Started Guide will help you get the most out of the Forum

Categories

  • All Categories
  • 350.8K Banking & Borrowing
  • 253K Reduce Debt & Boost Income
  • 453.5K Spending & Discounts
  • 243.8K Work, Benefits & Business
  • 598.6K Mortgages, Homes & Bills
  • 176.8K Life & Family
  • 257K Travel & Transport
  • 1.5M Hobbies & Leisure
  • 16.1K Discuss & Feedback
  • 37.6K Read-Only Boards

Is this how you want to be seen?

We see you are using a default avatar. It takes only a few seconds to pick a picture.