I thought it might be interesting if I looked back at my 2023 caseload and highlight some stories. What follows are all real live cases. Estate planning must work for the client and their heirs. One of my definitions of real love is to leave your affairs in a tidy manner. What follows are I think examples of this. If you have any questions, please contact me.
Robert Schon
T(DD:) 020 7267 5010.
E: rschon@streathers.co.uk
1) Maximising the number of family members who can enjoy business asset disposal relief (‘BADR’).
My clients were in their 60s, own a trading company, have adult children and are beginning to think of selling or liquidating their company.
BADR, previously called Entrepreneurs Relief, is a CGT relief to incentivise individuals to grow and invest in their trading business. BADR is available when qualifying business assets (like shares in a trading company) are disposed of. The rate of CGT due on qualifying BADR gains is 10% and is subject to a £1mlifetime limit. The current maximum BADR tax saving is £100,000.
To access BADR when shares in a trading company are sold, the following conditions must be met for at least 2 years before the date of disposal:
- The taxpayer must be an employee or director. There are no minimum hours requirements so s/he can work part time; and
- The shareholder must own at least 5% of the shares giving at least 5% of the voting rights; assets on a liquidation; dividends and sales proceeds.
S165 Taxation of Chargeable Gains Act 1992 allows e.g., a gift of shares in a family trading company to occur on a no gain no loss basis. This means, for example, for the transferor their child can receive 5% of the family company share capital without triggering a CGT charge. There is a similar Inheritance Tax relief.
The net result is if more than 2 years before any planned sale (or liquidation) of a family trading company, each adult child of the family is e.g., appointed to the board and owns at least 5% of the shares for 24 months pre the disposing event, when the family trading company is sold or liquidated a CGT saving will be enjoyed by the family.
2) A single ageing parent (‘P’) who has more than 1 child and adds only 1of their children as a signatory on their bank account otherwise than pursuant to a power of attorney.
The issue here is that absent evidence of a contrary intention, when P dies the balance in the joint account will pass by survivorship to the surviving account holder and will not pass as an asset of P’s will which says ‘equally to my children.’
If this result is not what P wants/intends, documentation should be put in place by P (and is best put in place before the joint account is opened) to ensure the account passes according to the terms of P’s will.
ROBERT SCHON PLANNING AND TAX ADVICE 