Thursday, July 10, 2014
A UK accountancy firm that specializes in advising rural businesses has warned that plans to cap the total amount of tax protection that an individual can gain from trusts will leave farm owners with new Inheritance Tax (IHT) and Capital Gains Tax (CGT) liabilities..
Andrew Vickery of Old Mill explained that proposals currently being considered by HM Revenue and Customs (HMRC) will have a particularly pronounced impact on family farms due to rising property values and the increasing number of farm cottages that are let out. Trusts are often used by family farms because let properties lose tax reliefs associated with being a business asset, and also to ensure that properties are able to be passed down generations without incurring substantial tax liability.
Up until now it has been possible to set up multiple trusts to gain multiple exemptions. If the proposals are implemented, trusts set up from June 6, 2014, will share just one overall exemption of GBP325,000 (USD556,755) for an individual's lifetime. Vickery warned that the change would mean farmers will have to find other ways to pass assets down the generations without incurring high IHT and CGT bills, but said "there remain a good number of other options available."
HMRC is currently holding its third consultation on the subject. Last month, the Institute of Economic Affairs described the move as a "punitive step" against passing on wealth.