INHERITANCE TAX FACTSHEET

2010

WHAT ARE THE CURRENT ISSUES?

• Recent changes in IHT legislation have impacted on the potential inheritance tax liability which may be payable.  In particular, the option of transferring any unused Nil Rate Band (NRB) to the survivor of a marriage after 9 October 2007 regardless of when the first person died.  This includes registered civil partnerships. 
• The substantial reduction in the values of assets such as property and shares may have resulted in an overpayment of IHT.
• There was no mention of IHT during Mr Osborne's first 'coalition' budget at all.  This means that, on the basis of the measures previously announced, the nil rate band for transfers will be held at £325,000 for the next five years to 2014/15, bringing more estates into the charge to tax each year. 

WHAT CAN I DO?

• Ensure all allowances are utilised each year where resources allow
• Ensure the situation is regularly reviewed to ensure there is no unexpected tax liability that could have been avoided with forward planning
• Ensure that any documentation relating to a deceased spouse is retained safely to claim the unused NRB in future as solicitors only retain documentation normally for a period of 10 years.
• For any estates completed within the past five years it may be that relief can be claimed where property or shares were disposed of at a lower value than that at date of death.  The is done by substituting the sale value for that at the date of death but is subject to the difference in value being at least £1,000 or 5% of the value at date of death whichever is lower.  The sale must also be at arms length in the case of property so this cannot be to a connected person for an artificially low sale price.
• Where there is surplus income this can be used to fund for any potential IHT liability.  This helps in two ways.  It provides a lump sum to the beneficiaries on death on production of the death certificate so is paid out much more quickly than the estate.  This avoids the issue where assets cannot be sold due to difficult market conditions to pay the IHT bill.  It also avoids accumulating the surplus which will ultimately increase the potential tax bill.
• Ensure wills are up to date as discretionary will trusts may no longer be required now that NRB can be transferred on second death.

Let Milne Craig help you limit any potential inheritance tax.

For further information or if you have any questions contact Morag Lewis at Milne Craig on 0141 887 7811 or at morag.lewis@milnecraig.co.uk.