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Succession/IHT Planning

Our clients are a wealthy couple who are now in their early 70s and are generally looking to reduce their wealth by passing it on to their family. The couple started with a 100% shareholding in an investment company, which was reduced to just over 60% as a result of them gifting shares seven years ago to two trusts and their four children. However, their wealth is still vast and they were looking for the most tax-efficient way to reduce any inheritance tax liability on their wealth as it stands and passing the shares down to their children/grandchildren to carry on the company.

How we helped our client
EQ met with the couple to discuss the existing structure and to assess the expectations in disposing some of their shareholdings in the investment company and to see how we could tax-efficiently reduce their inheritance tax exposure.

Planning for inheritance tax exposure has been ongoing over the past 10 years, where EQ have been assisting in reducing the couple’s exposure by making use of gift exemptions and allowances and making use of inheritance tax nil rate bands by gifting shares to trusts in 2011. Further advice has been given in 2018 to make further gift of shares into trust below the nil rate band so that no inheritance tax is payable on transfer. In addition, gifting further shares to their four children reduced the couple’s share in the company to below 50% so that they are no longer majority shareholders.

EQ are working towards significantly reducing the couple’s estate as the combined estate exposed before giving the advice and the gifts taking place was approximately £7.2m. Although a likely capital gain of approximately £70k will be payable on the transfer of shares to the children, the inheritance tax saving will be in the excess of £1m provided the couple survive the next seven years, making the exercise worthwhile. The couple’s dividend income from the company will also be reduced and instead paid directly to the children and trusts again reducing the potential cash build-up in their estate.

For more information or to discuss further, please contact the Private Client Taxperts.

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