IFA trying to sell me on inheritance tax avoidance strategy for my mother (who has dementia)

DRS1

There is of course the famous judicial quote to the effect that "It is the duty of every citizen to avoid paying as much tax as he can"

These days he may not be able to say that especially when your tax return has a section asking if you have participated in any tax avoidance schemes.

TheGreenFrog

poseidon1 said:

All I would say is HMRC has no problem with DGTs as long as the settlor's life is truly insurable and commercially underwritten  - see HMRC manual below

https://www.gov.uk/hmrc-internal-manuals/inheritance-tax-manual/ihtm20424

Yes, someone suggested that a relative of mine consider a DGT.  Relative was 90 and some research showed that anyone of 90 or over does not have an insurable life (or rather is not considered so by HMRC), no matter how healthy they are.

ali_bear

That question is a trap. You would have to be an idiot to tick it, but all the tax inspector has to do, when discovering some evasion in your affairs, is to point at your unticked box and say "you lied on your tax return". Then they have cause to disbelieve everything you've ever told them. 

It's a bit like a question "Have you ever been a terrorist" on a job application. If they eventually find out you lied, it is justification for dismissal. 

jimi_man

ali_bear said:

That question is a trap. You would have to be an idiot to tick it, but all the tax inspector has to do, when discovering some evasion in your affairs, is to point at your unticked box and say "you lied on your tax return". Then they have cause to disbelieve everything you've ever told them. 

It's a bit like a question "Have you ever been a terrorist" on a job application. If they eventually find out you lied, it is justification for dismissal. 

I think that if it’s found out that you’re a terrorist I’d suggest that you’ve got bigger problems to worry about than lying an an application form….

TheGreenFrog

DRS1 said:

There is of course the famous judicial quote to the effect that "It is the duty of every citizen to avoid paying as much tax as he can"

These days he may not be able to say that especially when your tax return has a section asking if you have participated in any tax avoidance schemes.

I suppose the key word is "schemes".  I have assumed, perhaps incorrectly, that this does not mean well established tax planning devices of which HMRC is well aware. 

ali_bear

jimi_man said:

I think that if it’s found out that you’re a terrorist I’d suggest that you’ve got bigger problems to worry about than lying an an application form….

Obviously. But imagine the situation where they discovered just that but then had to hunt around to try to find reasons to sack you. That's the point. 

poseidon1

Folks, I sense this has become a debate which  has veered widely off course and now of little help to the OP and the specific question has to what exactly the  IFA  might raise with regard to potential IHT planning matters.

Perhaps the OP could have the last word on the matter, rather than this descending into an unseemly 'bun fight'.

kinger101

Marcon said:

[Deleted User] said:

I've been talking to an IFA about an immediate-needs annuity to cover care costs for my mother (I have power of attorney), but the IFA is suggesting another meeting to go over my mothers savings and property value and is saying they can 'protect it' from inheritance tax without my mother needing to give anything away.

I don't like the idea of tax avoidance and I'm always sickened to read about these tricks the superwealthy use to dodge tax.

Before I have another meeting with this IFA, any ideas what scheme they likely have in mind?

You're confusing tax avoidance (which is entirely legitimate) with evasion (which isn't!).

Surely the best person to explain what the IFA has in mind is the IFA? If you then want some thoughts, post the details here and doubtless plenty of people will have a view, regardless of their actual level of knowledge.

That's not quite right.

Tax avoidance tends to be used to describe ways tax is reduced legally though not via methods intended by parliament. 

Tax evasion is illegally not paying tax.  Which might be the case with a failed avoidance scheme, or not reporting profits.

I'd say pensions and ISAs are tax planning rather than avoidance.  

No IFA is going to deliberately come up with a tax evasion scheme as by definition, it does not reduce tax liability, and will likely land them in prison.

Can't comment on the IFA's scheme as don't know what it is but I'd say some of the investments relying on business reliefs are suitable to very few people due to risk.  

As for morality, no one is ethically obliged to maximize the amount of tax they pay.

DRS1

TheGreenFrog said:

DRS1 said:

There is of course the famous judicial quote to the effect that "It is the duty of every citizen to avoid paying as much tax as he can"

These days he may not be able to say that especially when your tax return has a section asking if you have participated in any tax avoidance schemes.

I suppose the key word is "schemes".  I have assumed, perhaps incorrectly, that this does not mean well established tax planning devices of which HMRC is well aware. 

Well they go on to ask you for a registration number (or the like) - the avoidance scheme is supposed to be registered with HMRC!  Presumably that is so they know who to come after once they have litigated the validity of the scheme (assuming the scheme fails).

Cobbler_tone

kinger101 said:

Marcon said:

[Deleted User] said:

I've been talking to an IFA about an immediate-needs annuity to cover care costs for my mother (I have power of attorney), but the IFA is suggesting another meeting to go over my mothers savings and property value and is saying they can 'protect it' from inheritance tax without my mother needing to give anything away.

I don't like the idea of tax avoidance and I'm always sickened to read about these tricks the superwealthy use to dodge tax.

Before I have another meeting with this IFA, any ideas what scheme they likely have in mind?

You're confusing tax avoidance (which is entirely legitimate) with evasion (which isn't!).

Surely the best person to explain what the IFA has in mind is the IFA? If you then want some thoughts, post the details here and doubtless plenty of people will have a view, regardless of their actual level of knowledge.

That's not quite right.

Tax avoidance tends to be used to describe ways tax is reduced legally though not via methods intended by parliament. 

Tax evasion is illegally not paying tax.  Which might be the case with a failed avoidance scheme, or not reporting profits.

I'd say pensions and ISAs are tax planning rather than avoidance.  

No IFA is going to deliberately come up with a tax evasion scheme as by definition, it does not reduce tax liability, and will likely land them in prison.

Can't comment on the IFA's scheme as don't know what it is but I'd say some of the investments relying on business reliefs are suitable to very few people due to risk.  

As for morality, no one is ethically obliged to maximize the amount of tax they pay.

How did I know (before reading this thread) that it was going to turn into a debate of tax avoidance vs tax evasion!

Tax avoidance is like the K2 scheme (IMO) legally OK but morally wrong. I wouldn't put it in the same world as upping your pension contribution to mitigate the amount of tax you pay, that's being tax efficient....but you can guarantee a heated debate out of it. Avoidance/evasion are pretty binary descriptors.