Agricultural Addition Issue 21 AutumnWinter 2017-18 - page 7

• autumn 17 • Issue 21
With the increase in probate
fees, more and more of us
will consider making more
use of the Inheritance Tax
lifetime gifts as follows:
Annual Exemption –
each individual can make
lifetime gifts of £3,000
(cash or assets) in total per
tax year and the gift will
be exempt from IHT. Any
unused proportion of the
exemption may be carried
forward for one year only
resulting in a maximum
possible gift of £6,000
i.e. you cannot accumulate
the allowance and make
one single large gift.
Small Gifts –
You can give
as many gifts which total up
to £250 in a tax year to as
many people you want (e.g.
£200 to each grandchild).
No relief applies if the gift
exceeds £250) and there will
be no inheritance tax.
Gifts in Consideration of
Marriage/Civil Partnership
The gift must be made
before the wedding day and
the wedding must happen
for it to be effective for
inheritance tax.
A parent can gift up
to £5,000, £2,500 if a
grandparent or £2,500 if
party to the marriage/civil
partnership to the other or
£1,000 by anyone else will
be exempt.
Normal expenditure
out of income
To obtain this exemption
the gift must be part of your
normal expenditure out of
income. When comparing
year on year it must not
reduce your available net
income below that which
is required to maintain
your normal standard of
living. E.g. annual birthday
cash gift, life insurance
policy premiums paid on
behalf of someone else
or grandparents paying
school fees.
These gifts must be well
documented and to succeed
in obtaining the exemption
must be regular.
Gifts to Charities
Gifts either outright or held
on trust will be exempt from
Inheritance Tax if you give to
a charity, museum, university
or community amateur
sports club. Some gifts
to charities can also have
income tax benefits.
Gifts to Political Parties
Gifts to political parties
are tax free under certain
Any gifts over and above
those detailed are likely to
have additional implications
in terms of Inheritance
Tax and Capital Gains Tax,
therefore talk to us before
making any gifts.
If the new land
was acquired for
£400,000, then
the old assets
proceeds would
have been fully
reinvested in the
new land, no tax
would be payable
but the new land’s
base cost would
be £150,000
Rollover relief can
defer capital gains
tax if the pitfalls
are avoided.
BUT, you are
gambling against
potential future
increase in tax
rates, consider if
you need to use
rollover when the
current capital gains
tax rate is only 10 or
20%? By obtaining
full rollover relief you
will have tied up all
the cash generated;
could it be better
utilised in other
parts of the business,
or for family purposes
even if this means
paying some tax?
Please speak to us
well in advance to
avoid you falling
foul of these pitfalls.
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