Member Article

Darlington law firm warns that tax efficient ‘gifts’ and precious ‘tax reliefs’ could be cut following COVID-19 crisis

Latimer Hinks Solicitors is warning clients to prepare for stricter rules regarding gifts and Inheritance Tax (IHT) once the coronavirus crisis is over.

This follows a prediction by experts that taxes stand to rise substantially in order to fund the government spending to support individuals and businesses through the unprecedented circumstances.

Currently, IHT on estates is 40 percent, however there are suspicions that this could be increased, as it was following WWII, or that valuable reliefs from Inheritance Tax such as Agricultural Property Relief (APR) and Business Property Relief (BPR) could be restricted or even removed. This is in addition to potential further increases in VAT, Income Tax and National Insurance.

Although no plans have formally been announced, chancellor Rishi Sunak has made it clear that decisions on “righting the ship” will need to be enacted.

Elizabeth Armstrong, managing director at Latimer Hinks, said: “A great deal of money is being spent at the moment in order to keep businesses, individuals and the NHS solvent during the current crisis, and it is becoming apparent that this will need to be recouped from somewhere.

“History suggests that this likely to come from increasing tax revenues and an obvious target is IHT. This area of tax is highly complex – currently various reliefs and exemptions apply to individuals allowing them to mitigate their exposure to IHT, such as the “seven-year rule” that applies to gifts and where business and agricultural assets can, if the circumstances are correct, be left on death free from IHT altogether.

“The government could easily increase IHT revenues by significantly altering the rules regarding these exemptions and reliefs or removing them altogether without actually having to increase the current 40 percent rate of tax. For those clients wishing to take advantage of the existing rules, we are suggesting they do this sooner rather than later.

“We work with a number of agricultural clients and business owners who have reliefs specific to them and, while these have not been part of the conversation explicitly, we know that should APR and BPR be discontinued, this would have a huge impact on them and the region.”

Elizabeth added: “As with many aspects of life, it is difficult to find time to do ‘life admin’ tasks which don’t seem urgent, but we all have time to stop and think, and this might be the right time to take advantage of these particular benefits, before they become unavailable.”

This was posted in Bdaily's Members' News section by News Gathering .