The Court of Appeal has unanimously upheld an earlier decision by the High Court in the case of Loring v Woodland Trust such that the amount of a nil rate band legacy was held to include the transferable nil rate band available to the deceased, Valerie Smith. In this  case, the effect of the decision is that the majority of the estate will pass to the Loring family and not the charity. An analysis of the previous High Court Case can be found here. It is important that taxpayers regularly review their wills and consider the impact of legacies as circumstances can change over time. HMRC's guidance at IHTM43065, which provides  examples as to when in their view the transferable nil rate band is included in a nil rate band legacy...

Download our recent IHT article published in the May issue of Tax Adviser magazine. The article considers recent developments in relation to IHT and in particular: 1. How much is a nil rate band legacy? - the case of Loring v Woodland Trust 2. Does a good repair covenant amount to a gift with reservation of benefit? - the case of Buzzoni & Ors v HMRC 3. IHT and joint bank accounts - the case of John Matthews (Executor of Mary Matthews deceased) v HMRC 4. A summary of HMRC's recent guidance in relation to business property relief (BPR) and surplus cash held by trading comapnies 5. An overview of the IHT changes relating to non-UK domiciled spouses from 6 April 2013 including some key planning points 6. Are debts deductible for IH...

Under the new Town & Country Planning rules, where the necessary conditions are met, farm buildings may be converted into up to 3 residential  dwellings  without obtaining the normal planning permissions. This relaxation of the rules will make developments easier and is likely to increase the value of some farms. Agricultural property relief (APR) provides up to 100% relief against inheritance tax for qualifying farm assets such as land, farm buildings etc. However, agricultural property relief is only available in respect of the 'agricultural value' of land - that is to say that any value attributable to development potential will not benefit from inheritance tax relief, unless the conditions for business property relief (BPR)...

A roundup of the latest news from the world of tax for individuals, businesses and professional advisers. Click on the links below to view the full articles. Do Nil Rate Legacies include the Transferable Nil Rate Band? Loring v Woodland Trust highlights the care that must be taken when interpreting (and drafting) nil rate band legacies in wills. Employee Share Ownership Update A summary of some recent changes to the rules for; employee shareholders, EMI share option schemes and share incentive plans Business Property Relief Update New technical guidance is available regarding the impact on BPR of (a) surplus cash, and (b) partnership structures. Is a Dividend Waiver a Settlement? HMRC continue to pay close attention to income spli...

Loring v Woodland Trust [2013] EWHC 4400 Ch highlights the care that must be taken when interpreting (and drafting) nil rate band legacies in wills and undertaking inheritance tax planning. Charities are often named as residuary beneficiaries of wills/trusts and it is becoming increasingly common for charities to protect their interests by challenging the personal representatives interpretation of the will and actions taken by trustees. In this case, the Court concluded that the nil rate band legacy included the full amount of the nil rate band available to the deceased's estate of £650,000 (i.e. including the transferable nil rate band). The effect of this was a reduced residue available to the charity of £30,385 (as opposed to £32...

See our Spring 2014 Tax Update for more recent cases. Business Property Relief (BPR) is a valuable inheritance tax relief, offering up to 100% relief against inheritance tax on qualifying business assets. The CIOT, STEP and the ICAEW Tax Faculty have recently released technical guidance regarding the availability of Business Property Relief (BPR) for inheritance tax in certain situations. The guidance has been approved by HMRC and therefore represents HMRC's current thinking on various issues. Key points from the guidance include: - Holdings of Surplus Cash by Trading Companies The recent economic climate means that many companies are retaining higher cash reserves than would previously have been the case. This cash is ...

See our Spring 2014 Tax Update for more recent cases. The inheritance tax case of Buzzoni and Others v HMRC concerning gifts with reservation of benefit was recently heard in the Court of Appeal. Background The background to the case is that after acquiring a leasehold interest in a property, Mrs Kamhi gifted an underlease of the property to a family trust in 1997. The terms of the underlease included a covenant for the family trust to keep the property in good repair, to keep it clean and decorated.  The trust was also required to pay the annual service charge for the property. The existence of the underlease meant that the value of the headlease in Mrs Kamhi's estate was substantially reduced. The executors completed the IHT forms ...

The Autumn Statement 2013 contains a number of provisions affecting the tax treatment of trusts: 1. The due dates for the payment of tax and filing of returns are to be aligned in relation to inheritance tax charges on trusts (i.e. 10 yearly periodic charges and exit charges). The proposed new rule is that a return must be submitted and tax paid by 6 months after the end of the month in which the chargeable event took place. 2. For inheritance tax purposes only, income which has not been distributed for 5 years will be added to the capital of the trust in calculating the amount of the 10 yearly periodic charge and exit charge. Many trustees accumulate income with the intention of making distributions at a later date. Therefore truste...

A roundup of the latest news from the world of tax including highlights from the Finance Act 2013 as well as recent tax cases of interest. Click on the links below to view the full articles. Lifting the Corporate Veil http://wp.me/p3gayI-4a The recent case of Prest v Petrodel Resources Ltd looks at the powers of divorce courts to pierce the corporate veil. Sale of Home but is it a Residence http://wp.me/p3gayI-40 The recent Moore case acts as a reminder that occupation by itself is not sufficient to make a house a 'residence' for capital gains tax purposes. Company Purchase of Own Shares - Transactions Void http://wp.me/p3gayI-3M The recent case of Russell Baker highlights the difficulties that arise where a company purchase of...

Primary Points of Interest Where one party provides all of the funds for a joint bank account, it is important to consider how this may affect the inheritance tax treatment on death. This issue was considered in the recent case of John Matthews (Executor of Mary Matthews deceased) v HMRC (TC02329) where it was found that the full value of the account was subject to inheritance tax despite the funds having been transferred into a joint account nearly 8 years before the deceased's death. A key issue was the lack of evidence to support the view that the gift was an outright gift of a share of the funds in the account at the date of the gift (ie. that the account was held as tenants in common and not as joint owners). Whilst the t...