Private Client Quarterly Tax Digest: Winter edition - 2020

Welcome to the winter edition of the Private Client team's quarterly tax digest (QTD). Featuring news and insights on tax topics relevant to individuals.

In the midst of current uncertainty, many of us have been prompted to get our affairs in order. In doing so, it's worth considering that proactive, careful tax planning can reduce the taxes payable on your estate.

In this edition, our experts delve into effective ways to reduce both Inheritance Tax (IHT) and Capital Gains Tax (CGT) with three different tax reliefs and exemptions. We also highlight a lesser known tax relief for investors. And finally, with HRMC taking stronger action to crack down on tax evaders, we provide advice to help you prepare for enquiry and mitigate any risks.

Have you considered a charitable bequest to reduce Inheritance Tax?

As businesses continue to feel the economic impact of COVID-19, some senior employees and shareholders are  offering to waive their agreed salary and/or dividends to cashflow. We highlight the importance of implementing this properly with the correct documentation to avoid an unwanted tax bite.

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Making the most of Gift Relief on the transfer of business assets

With a CGT rate increase becoming more and more likely, you may wish to consider taking advantage of Holdover Relief (more commonly known as Gift Relief). This will enable you to transfer certain business assets to relatives or business partners for less than market value. 

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Gifts out of excess income – tax saving gifts 

Giving away surplus income as a gift is considered another effective way of planning for the future and reducing liabilities on your estate. But how do the rules regarding gifts work in practice? It could be worth utilising the ‘gifts out of excess income’ tax exemption if you meet the conditions. Click below to find out how the exemption works and whether you could make a saving. 

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The all too often forgotten Investors' Relief 

Have you utilised your Entrepreneurs’ Relief lifetime limit? If so, you could get an additional £10 million limit under Investors’ Relief. Many people aren't familiar with Investors’ Relief, however it’s now a potentially far more attractive relief for investors. Read more about the relief here, and why it's important to consider whether you meet the relevant requirements.

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Offshore trustees - don’t panic – we’ve been there before

One of the main points of interest in the Office for Tax Simplification (OTS) review has been the suggested alignment of CGT rates with income tax. This takes us back to 1998, when Nigel Lawson did just that. Much has been said about the effect on entrepreneurs selling their companies. But it also has the potential to hit beneficiaries of offshore trusts particularly hard.

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HMRC further increase efforts to reduce tax evasion

With HMRC’s increased focus on tax evasion regularly making the news, individuals should brace themselves for an enquiry into their tax affairs. By preparing for the worst, you can ensure both the costs and worries of an enquiry are kept to a minimum. Find out how you can prepare by clicking below.

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Read our other quarterly Tax Digest articles

Want to read our previous articles?

Autumn edition - 2020 

In this edition, we discuss how some senior employees and shareholders of businesses need to beware of potential tax traps when are offering to waive their agreed salary and dividends to help cashflow. We also consider whether now, while the markets remain unpredictable, could be the perfect time to consider your estate planning options. In other non-COVID-19 related news, we look into informal procedures for estate taxes, generous tax reliefs for high risk investments and more.

Summer edition - 2020 

In this edition, you'll find two articles on different ways to reduce inheritance tax, one of which can be implemented after death. With lockdown putting pressure on all relationships, we share tax considerations for those thinking about separation or divorce. And finally, we explore the tax benefits of ISAs and give practical guidance for those with National Insurance Contribution gaps.

Spring edition - 2020 

In this edition we look at practical steps to to take to reduce your 2019/20 tax bill, urgent action required on selling residential property and guidance from HMRC regarding the location of cryptocurrencies for tax purposes. We also review the impact of a recent case regarding abandoned construction contracts and delve into trusts and considerations before their use and structuring.

Autumn edition - 2019
In this edition, see how Gift Aid can reduce your tax bill, catch up on an important notice for those claiming Entrepreneurs Relief, and read guidance around the crucial difference between lasting power of attorney and executors. We also take a look at how to navigate your way through your financial obligations after the death of a loved one.  

Summer edition - 2019 
Read our advice on how to deal with phone scammers, an introduction to cryptocurrency, guidance around securing you and your family's financial future as well as our thoughts on new Prime Minister Boris Johnson's proposed higher-rate tax cut.

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