How to Avoid Inheritance Tax

By Carl Bayley BSc ACA

Contents of How to Avoid Inheritance Tax

Chapter 1. Introduction 
1.1 There Are Two Certainties in Life
1.2 Guide Overview
1.3 A Brief History of Inheritance Tax
1.4 Why Worry?
1.5 Where Does the Tax Come From?
1.6 Married Couples & Civil Partners
1.7 Tax Years
1.8 Trust Terminology
1.9 A Guide to Effective Inheritance Tax Planning
1.10 About the Examples

Chapter 2. Inheritance Tax Principles 
2.1 Transfers of Value
2.2 Who Is Liable for Inheritance Tax?
2.3 Who Actually Pays the Tax?
2.4 Grossing Up
2.5 Who Are the Personal Representatives?
2.6 Who Pays the Tax on Lifetime Transfers?
2.7 Collection of Tax
2.8 How Much Tax Is Payable?
2.9 What Is Your Estate?
2.10 The Basic Calculation on Death
2.11 Making the Payment
2.12 Interest-Free Loans
2.13 Quick Succession Relief

Chapter 3. The Main Exemptions 
3.1 What Is an Exemption?
3.2 The Nil Rate Band
3.3 The Spouse Exemption
3.4 Gifts to Charities & Other Exempt Bodies
3.5 Charitable Legacies
3.6 National Heritage Property
3.7 Death on Active Service

Chapter 4. Lifetime Transfers 
4.1 Inheritance Tax on Lifetime Transfers 3
4.2 Chargeable Lifetime Transfers
4.3 Potentially Exempt Transfers
4.4 Problems with PETS
4.5 Death within Seven Years of a Lifetime Transfer
4.6 Relief for Reduction in Value
4.7 Timing of Lifetime Gifts
4.8 Evidence
4.9 Gifts with Reservation
4.10 Why Not Just Give it All Away?

Chapter 5. Lifetime Exemptions 
5.1 Absolute Exemption
5.2 The Annual Exemption
5.3 The Small Gifts Exemption
5.4 Using the Annual and Small Gifts Exemptions Effectively
5.5 Gifts in Consideration of Marriage
5.6 Maintenance of Family
5.7 Dependent Relatives
5.8 Normal Expenditure Out of Income
5.9 Transfers Not Intended to Confer Gratuitous Benefit
5.10 Transfers Allowable for Income Tax or Conferring Retirement Benefits

Chapter 6. Inheritance Tax Planning for Married Persons 
6.1 Scope of this Chapter
6.2 A Brave New World?
6.3 The Transferable Nil Rate Band
6.4 Nil Rate Band Transfers in Practice
6.5 Remarriage
6.6 Separation & Divorce
6.7 Inheritance Tax Planning for Married Couples
6.8 The Second Time Around
6.9 Using the Transferable Nil Rate Band
6.10 Estate Equalisation
6.11 Will Trusts
6.12 The Widow’s Loan Scheme
6.13 When and How to Undo Obsolete Planning
6.14 The Daughter-In-Law Plan
6.15 The Spouse Bridge
6.16 The Family Debt Scheme
6.17 Grab a Granny
6.18 Married Couples with Mixed Domicile

Chapter 7. The Tax Benefits of Business Property 
7.1 Introduction
7.2 When Is Business Property Relief Available?
7.3 Just How Useful Is Business Property Relief?
7.4 Qualifying Businesses – Basic Principles
7.5 Property Investment or Letting Businesses
7.6 Businesses Exploiting Land
7.7 What Does ‘Wholly or Mainly’ Mean in Practice?
7.8 Relevant Business Property
7.9 What Is the Value of a Business?
7.10 Business Property Relief for Shares and Securities
7.11 The Minimum Holding Period
7.12 Replacement Business Property
7.13 Extra Rules for Lifetime Transfers
7.14 Lifetime Transfers of Property Chargeable on Death
7.15 How to Preserve Business Property Relief
7.16 Maximising Business Property Relief
7.17 Sheltering Investments with Business Property Relief
7.18 Money Box Companies
7.19 Changing the Business to Avoid Inheritance Tax
7.20 Business Succession Planning
7.21 Business Property Relief for Smaller Shareholdings
7.22 The AIM Exemption
7.23 Agricultural Property Relief
7.24 Farmhouses
7.25 The Safety Net
7.26 The Double Dip
7.27 Make Hay While the Sun Shines

Chapter 8. Inheritance Tax Planning with Trusts 
8.1 What Is a Trust?
8.2 Where Do We Stand with Trusts Today?
8.3 What Types of Trust Are There?
8.4 What Is an Interest in Possession?
8.5 Discretionary Trusts
8.6 Inheritance Tax Regimes for Trusts: An Overview
8.7 Transfers into Trust
8.8 The New Trust Hierarchy
8.9 Bare Trusts
8.10 Bereaved Minors’ Trusts
8.11 Pre-22/3/2006 Interest in Possession Trusts
8.12 Disabled Trusts
8.13 Immediate Post-Death Interests
8.14 Transitional Serial Interests
8.15 18 to 25 Trusts
8.16 Relevant Property Trusts
8.17 End of Trust Interests within Beneficiary’s Estate
8.18 The Relevant Property Regime
8.19 Ten-Year Anniversary Charges
8.20 Exit Charges
8.21 Exit Charges: Special Cases
8.22 Death of Settlor
8.23 Income Tax and Trusts

Chapter 9. More Advanced Planning with Trusts 
9.1 The Relevant Property Trust Shelter
9.2 Serial Trusts
9.3 How Useful Is the Relevant Property Trust Shelter?
9.4 How to Avoid Anniversary and Exit Charges
9.5 Why Not Just Give Assets to the Beneficiaries?
9.6 How to Avoid Inheritance Tax and Capital Gains Tax at the Same Time
9.7 Investment Property Trusts
9.8 Limitations to Planning with Relevant Property Trusts
9.9 Discounted Gift Trusts
9.10 Loan Trusts
9.11 Excluded Property Trusts
9.12 Older Beneficiaries
9.13 Pilot Trusts

Chapter 10. Practical Aspects of Inheritance Tax Planning 
10.1 The Bigger Picture
10.2 Commercial Issues
10.3 Interaction with Other Taxes
10.4 Valuations
10.5 Related Property
10.6 Jointly Held Property
10.7 Valuing Jointly Held Property
10.8 Other Jointly Held Assets
10.9 Mortgages
10.10 Residential Care Fees
10.11 Wills and Intestacy
10.12 Statutory Rights
10.13 Life Insurance
10.14 Life Policies Written in Trust
10.15 Insuring for Inheritance Tax Liabilities
10.16 Pensions
10.17 Lottery Syndicates
10.18 Minor Problems
10.19 Income, Capital and Control
10.20 Associated Operations

Chapter 11. Interaction with Capital Gains Tax
11.1 A Quick Capital Gains Tax Update
11.2 The Uplift on Death
11.3 The Capital Gains Tax vs Inheritance Tax Dilemma
11.4 Gifts of Business Assets
11.5 Business Property Relief and Entrepreneurs’ Relief
11.6 Transfers to Spouses or Civil Partners
11.7 Capital Gains Tax and the Family Home
11.8 Capital Gains Tax and Gifts with Reservation
11.9 Other Assets
11.10 Capital Gains Tax and Trusts

Chapter 12. The Family Home
12.1 When Our Main Asset Becomes Our Main Liability
12.2 Move Out and Then Give It Away
12.3 Sell Up and Give Away the Proceeds
12.4 Re-mortgage and Give Away the Proceeds
12.5 Re-mortgage and Buy an Annuity
12.6 Sell up or Re-mortgage and Invest the Proceeds
12.7 Sale at Market Value
12.8 The Widow’s Loan Scheme & The Family Home
12.9 Leave a Share to the Children
12.10 Children Put Their Share into Trust
12.11 Leave a Share to a Discretionary Trust
12.12 The ‘Full Consideration’ Method
12.13 Co-Ownership
12.14 Shearing
12.15 The Three-Way Split

Chapter 13. The Pre-Owned Assets Charge 
13.1 Moving the Goalposts
13.2 Exemptions
13.3 Opting Out
13.4 Implications for Planning with the Family Home
13.5 Tax Charges and Domicile

Chapter 14. Domicile 
14.1 What Is Domicile?
14.2 Domicile of Origin
14.3 Domicile of Choice
14.4 A Guide to Emigration
14.5 Shedding a UK Domicile of Dependency
14.6 Retaining a Domicile of Origin

Chapter 15. The Inheritance Tax Planning Timetable 
15.1 It’s Never Too Early to Start
15.2 Marriage
15.3 Becoming a Parent
15.4 Adult Children
15.5 Your First Grandchild
15.6 Losing a Parent
15.7 Still Together
15.8 Losing a Spouse
15.9 Remarriage
15.10 Life Expectancy Over Seven Years
15.11 Life Expectancy Three to Seven Years
15.12 Life Expectancy Two to Three Years
15.13 Loss of Capacity
15.14 Deathbed Planning

Chapter 16. Planning After Death 
16.1 Deeds of Variation
16.2 Disclaimers
16.3 Transfers Out of Trusts within Two Years of Death
16.4 Second Chances
16.5 Post-Mortem Relief

Appendices
A. The Nil Rate Band 1914 – 2015
B. Double Tax Treaties
C. Connected Persons
D. Sample Documentation
E. National Bodies
F. Useful Addresses
G. The European Union and The European Economic Area
H. UK Tax Rates and Allowances

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