Content
Reverse Charges
Beyond The Grave
Director's Two Hats
IHT Plan Fails
VAT And Cash
Amnesty International
An Inspector Calls
Losing A Bet
Caring Doctors
TAAR Brush
Made To Be Broken
Flat VAT
Safe Deposit
Tax On Gas
Working Late
Composite Companies
Excuses, Excuses
|
It's unusual to see tax cases in the national press, but Phizackerley made it because it hit a number of raw nerve-endings - an inheritance charge falling on a widow's estate because she had not done enough to earn her share of the marital home. IHT is unpopular in the press right now, and this seemed particularly harsh. The couple had entered into a standard plan: they had put their house into "tenancy in common", which means that each owns half but the survivor doesn't automatically get the other half when one dies. The first to die - Mrs P - left her half to a trust. Mr P bought it back with an IOU for £150,000, payable when Mr P died. This sort of thing has been regarded as standard planning to take advantage of two nil rate bands for IHT - as IHT currently starts at £300,000, you can pass on £600,000 of house to your children with no tax as long as you can divide it in two in this way. The problem was that, when Mr P died, the Revenue said that his executors couldn't treat the IOU as a "real" liability of his estate. It wasn't taken off the value of the whole house when working out his IHT. Why not? Because he had originally paid for the house - he was the one with the job, so he must have generated the cash which bought the house for the two of them. There are rules to stop you deducting a debt for IHT if the debt arises on buying back something you gave away - even if the gift, the repurchase and the debt are spread out over nearly 20 years. If Mrs P had been able to contribute cash to the purchase of the house - rather than just the effort of home-making that allowed Mr P to go out to work and earn money - there would not have been a problem. There are variants of this "two nil rate band" plan that still work, but some must now be called into question. If you read about the case and were worried - or you are worried now! - we will be happy to advise you about what works and doesn't work in IHT planning.  |