New rules on IHT Why family businesses must act now
agreements will also be important to ensure that business interests are capable of being passed to a spouse in your Will - not always a given. 2. Record your wishes Taking time to consider the impact of your wishes, but also recording them in a way which comes across as authentic and realistic, is time very well spent. We are seeing an increasingly imaginative approach to ensuring all stakeholders know the wishes of the family business owners, including letters of wishes being recorded as videos, statements of family values ranging from a single page to many chapters, and the use of far more vernacular language reflecting the voice of the author rather than their legal advisers. Remember that wishes can change over time so should be updated regularly – we recommend every five years. 3. Understand mental incapacity The loss of mental capacity to make a business decision can cause real and sometimes lasting impact to the future of your family business (and other assets outside of the business). Since 2007, a modern system of Lasting Powers of Attorney gives you the opportunity to choose who can manage affairs if you are unable to do so yourself. Familiarise yourself with how these documents work, discuss them with your legal advisers, your family and also your business board.
As we approach the end of the tax year, many family business owners and their boards are considering how the changes to Business Property Relief (BPR) and Agricultural Property Relief (APR) from Inheritance Tax (IHT) will affect them. A new IHT charge on trading assets passing to heirs when a shareholder dies will apply for the first time in 30 years. The charge will also apply to trusts every 10 years (with some exceptions relating to trusts for spouses and vulnerable people) and gifts made within 7 years of the death of a shareholder. The areas we highlight here focus on the key tax and other related steps all family business owners should be considering. They are not limited to just businesses qualifying for BPR but to all owners, including those with property and other investment businesses. Careful planning is needed. And steps should be taken now. 1. Make a Will or review your existing Will Putting a Will in place or reviewing your existing Will is essential. Given the transferability of the new £2.5m BPR allowance (with spouses able to share their individual allowances), married couples and civil partners can leave £5 million of eligible assets in addition to using any other allowances
Bryony Cove Farrer & Co LLP
such as the Nil Rate Band and Transferable Nil Rate Band, if structured correctly.
Reviewing shareholder agreements, articles of association and partnership
FBUK Issue 6 20
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