Inheritance Tax (IHT) in the UK has often been dubbed as a ‘voluntary tax.’ It’s an odd concept, isn’t it? Who would voluntarily pay any tax given the choice? In reality, it’s simply a colloquial reference due to the perception that, with careful planning and taking advantage of the available reliefs and exemptions, individuals can significantly reduce (or even eliminate) the amount of IHT payable on their estates. Yes – that’s where expert advice comes in! As the intricacies of IHT are manyfold, it’s essential to be acquainted with the specifics. And, even more so if you hope to navigate its complexities successfully. That’s where Inheritance Tax specialists (like ours) really come into their own.

So, what do you need to know? Let’s take a quick look…

Lifetime Planning Strategies – what are they?

‘Lifetime planning strategies’ are essential tools in ensuring that hard-earned wealth is preserved for future generations. These strategies centre around making provisions today to minimise the future impact of IHT on your estate. By taking action now, you can strategically reduce the potential IHT burden on your beneficiaries once you have gone. It’s definitely not a cheery topic, we know! But, surely five minutes thinking about the unthinkable is a fair trade for the future peace of mind and prosperity of those you leave behind.

The good news is that there are many ways you can ensure your wealth is dispersed while limiting IHT. So, we’ve covered a few of the more popular methods below:

Gifting and Potentially Exempt Transfers (PETs)

One of the most effective lifetime planning strategies is gifting. By gifting assets to loved ones during your lifetime, you can reduce the value of your estate, hence potentially lowering IHT liability. But there’s a catch: for the gift to be entirely exempt from IHT, you need to survive for seven years after making it. These gifts are known as Potentially Exempt Transfers (PETs). If you don’t survive the seven years, the gift might still be subject to IHT, albeit potentially at a reduced rate.

You also need to be mindful whether a gift might trigger other implications. For example, gifting assets such as property or shares will likely trigger capital gains tax liabilities. This is because gifts are still assessed to capital gains tax based upon the market value of the asset. If the gift is of a business asset or to a trust it might though be possible to claim holdover relief.

Given none of us know what the future holds a key aspect of this is to identify assets to gift that are definitely surplus to your requirements. A true gift cannot be undone and you may well have many years left in you yet!

You also need to have a suitable person to gift an asset to. It could be a blessing or a curse, but with lifetime gifting you are likely to see how your beneficiary spends your hard earned money.

Setting Up Trusts

Trusts are another avenue that fall within our category of lifetime planning strategies. They allow for assets to be held on behalf of beneficiaries. Depending on the type of trust chosen, there are different tax implications. For instance, Discretionary Trusts offer flexibility in terms of who, when, and how beneficiaries receive assets. However, they come with periodic and exit tax charges. On the other hand, Interest in Possession Trusts gives beneficiaries a right to income from the trust. Remember thought, the underlying assets might still be subject to IHT.

Trusts certainly have their place for anyone who wants to retain some control over how and when funds are made available to beneficiaries. They can also be useful should a child be in a potentially volatile marriage. This is because assets held in trust are usually outside the scope of matrimonial action. Beneficial tax status is also given to trusts that are set up to look after the interests of a vulnerable beneficiary.

You can’t take it with you – so why not spend it?

An obvious way to reduce the value of your estate is to spend it. Why not enjoy your retirement, you have earned it! Of course, as mentioned before, do also ensure you keep enough by to cover all eventualities.

Consider being charitable

Gifts to registered charities are exempt from Inheritance tax. So, you can divert money from the taxman to a good cause instead! It is also worth mentioning that should 10% of a person’s net estate be left to charity, the rate of IHT is reduced from 40% to 36%. Often this tax saving will more or less cover the cost of the charitable legacy.

Investing in Exempt Assets

Certain assets are exempt from IHT. Investing in these can be an astute strategy to mitigate IHT exposure. For example, shares in unlisted companies and some AIM-listed companies might qualify for Business Property Relief (BPR) and can be completely exempt from IHT if held for at least two years. On a cautionary note these investments usually come with more risk than standard investment opportunities. As such, it would always be sensible to seek expert financial advice before making any significant commitments.

Maximise the benefits of pensions

Recent regulatory changes mean unused pension funds (which usually are not included within a persons taxable estate) can be passed on to any nominated beneficiary. A sensible strategy can therefore be to leave pension funds untouched for as long as possible into retirement. That’s even if it means living off savings! After all, this helps to reduce the taxable value of your estate. The pension fund could be kept in reserve, in case it is needed later in life.

Making regular gifts out of surplus income

The nil rate band has been frozen for 14 years now. This means that as estates have naturally grown in value, so too has their exposure to tax. If your annual income exceeds your requirements, this surplus can be gifted without tax consequence as long as it is done on a regular basis. It would be helpful to keep a record of regular annual expenditure in order to prove what income is surplus to your requirement.

Do you qualify for the Residential Nil Rate Band?

Extra relief is available for individuals who leave an interest in their home (or the proceeds from the sale of their home) to lineal descendants. However, relief is restricted should the persons estate exceed £2m, and no relief can be claimed by anyone with an estate worth more than £2.7m.

Aggregation can cause a problem here should everything be left to a surviving spouse. A potential solution for married couples is to consider using your Wills to transfer assets to children/grandchildren following the first death. Also try and take steps to keep within the £2m threshold.

The Role of Our Trained IHT Specialists

Inheritance Tax can be labyrinthine, with numerous reliefs, exemptions, and strategies available. And, that’s before we even think about the anti avoidance rules to be wary of. Our trained inheritance tax specialists are adept at navigating this maze. Providing a tailored approach, they ensure that your lifetime planning strategies are both efficient and in line with your objectives. Whether you’re considering gifting, establishing a trust, or exploring other means of safeguarding your assets, our specialists are on hand to offer the guidance and expertise you need.

Protecting Your Legacy

Lifetime planning strategies are about more than just tax efficiency; they’re about ensuring your wishes are adhered to and that your loved ones are taken care of. Engaging in these strategies today can pave the way for a brighter, more secure future for your beneficiaries. So, don’t leave it to chance; take control of your legacy today!

As always, we offer a free introductory meeting so that you can find out what we do and how we do it! So, please do call us on 01243 782 423 to book your no-obligation meeting – there’s nothing to lose and potentially everything to gain!

If you’d like to speak to one of our experts about your accounts, please call 01243 782 423. Alternatively, you can email us from our contact page and we will be in touch!

We also update our YouTube Channel regularly with new content. Please see here: Lewis Brownlee YouTube channel.

The tax world is certainly an interesting one! Indeed, navigating through the multifaceted layers of estate planning often needs a high degree of expertise and precision. When it comes to securing proficient tax services for complex estates, understanding the nuances is even more crucial. That’s why we’ve decided to delve into the intricacies of complex estates. So, here’s how seeking professional advice can shield you from potential pitfalls and ensure a seamless transition of assets.

Identifying a Complex Estate

First things first! What is a Complex Estate and why does it matter?

A Complex Estate as defined by HMRC is one which is either is valued at in excess of £2.5 million. Or, one that during the period of administration incurs tax liabilities in excess of £10,000. Or, one that receives sale proceeds in any tax year of in excess of £500,000.

The two main aspects of significance are that HMRC require such an estate to be officially registered on their Trust Registration Service.  The estate is also then required to file self assessment tax returns for any year in which it incurs a tax liability.

The Challenges Posed

These extra reporting requirements mean that it might take a while to fully administer an estate. Ordinarily HMRC have a year from the date of a submission of a return to raise any queries. This means the Personal Representatives might need to retain assets until a year has passed from the submission of the last return or they have received confirmation from HMRC that they are happy with the information provided and will not be raising any queries.

In addition to regular tax returns, Personal Representatives often overlook the fact that if selling on residential property, it may be necessary to also submit a CGT return within 60 days of the date of conveyance.

Another matter for consideration is the protocols for distributing estate income. Although the estate will pay tax on the income it receives, which typically would be interest, dividends and rents, this income belongs to the beneficiaries of the estate. After this income is paid on to the beneficiaries, the Personal Representatives are required to prepare and pass on to the beneficiaries tax certificates (R185s).

How Accountants Can Assist

Where complex estates are involved, the assistance of skilled accountants is invaluable. Professionals (like us) facilitate smooth navigation through the bureaucratic intricacies, ensuring compliance with tax obligations while maximising the estate’s value. From strategic planning to asset valuation and distribution, professional expertise can play a vital role in safeguarding the interests of all stakeholders.

Moreover, seasoned accountants can foresee potential issues. So, they are best placed to pre-emptively address them, thereby averting costly legal disputes. Their in-depth understanding of tax legislations can also help in legally mitigating tax liabilities. Preserving the estate’s value for the beneficiaries can only ever be a good thing!

The Importance of Seeking Professional Advice

Seeking professional advice is not just recommended, but nearly essential when it comes to handling complex estates. Expert advisers are equipped with the tools and knowledge to unravel the complexities that these estates bring forth. They serve as allies, steering you clear from potential legal ramifications and ensuring adherence to the requisite tax obligations.

The presence of expert advice can also alleviate the emotional burden on the families. During what is often an emotionally charged time, having a professional on board can provide them with the assurance that the estate is managed judiciously and professionally. Thus, investing in tax services for complex estates becomes a prudent decision, shielding you from avoidable stresses and potential financial losses.

In short then, in the face of complexity and potential challenges, the support and guidance of experts in the field stand as a beacon of reassurance. Entrusting the management of complex estates to professionals ensures not just compliance with the legal framework but also the peace of mind that comes with knowing that the legacy left behind is in safe hands. So, if you are dealing with a complex estate, please do consider speaking to reputable professionals (like ours). It’s amazing how much easier life can be with the right tools and knowledge behind you!

If you’d like to speak to one of our experts about your accounts, please call 01243 782 423. Alternatively, you can email us from our contact page and we will be in touch!

We also update our YouTube Channel regularly with new content. Please see here: Lewis Brownlee YouTube channel.

The vast world of taxation is currently undergoing a significant shift. Recent data suggests there’s an eye-watering deficit of £5.2 billion between what HMRC should have collected in taxes and what they’ve actually received. Naturally, this discrepancy is propelling HMRC to intensify its efforts. What does this mean for you and us? In short, HMRC is amplifying its investigations, leading to an unprecedented surge in tax enquiries.

Why The Increase in Enquiries?

The aforementioned £5.2 billion deficit is a principal driving factor. With such a gaping hole in expected versus actual revenues, HMRC is left with little choice but to ramp up its investigation activity. It’s essential to understand that these enquiries are not solely reserved for those who might have suspicious tax activities. Even the most diligent taxpayers, who have committed no wrongdoing, can find themselves under the microscope.

What Does an Enquiry Entail?

Should you find yourself at the centre of an HMRC enquiry, irrespective of any wrong-doing, compliance is required by law. This means:

Submission of Records: Offering up any financial records or other information HMRC requests.

Attendance: Partaking in any meetings mandated by HMRC.

The process can be undeniably stressful, time-consuming and costly. What’s more, many of these investigations conclude with HMRC finding no evidence of wrong-doing. However, if discrepancies are found, taxpayers face not only additional costs but potential penalties.

Defending Against Enquiries: The Value of Early Expertise

From our extensive experience at Lewis Brownlee, we’ve observed that having us in your corner from the very outset is the most effective shield against these investigations. By enlisting our expertise as your accountants early on, you can ensure your tax affairs are exactly as they should be. Furthermore, our clients are able to sign up to our Tax Protection Service, which means they will have us by their side in the event of an enquiry.

Benefits of our Tax Protection Service:

Expert Representation: Our Tax Protection Service sees our seasoned team, well versed in the nuances of UK tax laws, navigate the intricate paths of enquiries for you.

Cost Coverage: It safeguards you against the potentially high accountancy fees associated with lengthy investigations up to £100,000. Yes – the costs can really go that high, particularly if agreement on a technical point cannot be reached, and a case ends up going to a tribunal!

Peace of Mind: It allows you to sleep easy, knowing that our team is managing the complexities, ensuring you meet all compliance demands and substantially reducing the stress of the process.

In short, as the tax landscape evolves and the intensity of HMRC investigations grows. So, equipping yourself with a Tax Protection Service becomes more crucial than ever. At Lewis Brownlee, we’re here to stand by your side. As such, we’ll ensure you’re not just compliant but protected against the uncertainties of the tax world. So, what are you waiting for? Become a client today and sign up to benefit from our Tax Protection Service. It really is all round peace of mind.

If you’d like to speak to one of our experts about your accounts, please call 01243 782 423, or email from our contact page and we will be in touch!

We also update our YouTube Channel regularly with new content, see here: Lewis Brownlee YouTube channel.

Navigating the labyrinth of the tax world is no simple task. Add to this the possibility of HMRC tax enquiries, and the journey becomes even more intricate. But before you start stressing, it’s essential to understand that having the right support can make all the difference. At Lewis Brownlee, our clients can benefit from signing up to our Tax Investigation Service, which has been instrumental in already helping so many out. Don’t believe us? Here are a few recent case studies we have encountered where the value of our Tax Investigation Service really shines through…

Case Study 1: The Overdrawn Director’s Loan accounts

The directors of a large construction caught HMRC’s attention due to having significantly overdrawn director’s loan accounts. Whilst it isn’t usually wrong to have overdrawn loan accounts, the authorities see it as a warning flag. So, it raised the chances of an enquiry. Once instigated, this particular enquiry didn’t just stop at the company but extended to the directors’ personal finances as well. Unfortunately, the company was not part of any fee protection scheme. So, the result? Due to the protracted and detailed nature of the enquiry, a lot of time was spent on the matter. Consequently, this led to a significant amount of professional fees.

Case Study 2: The Builder’s Ordeal

HMRC’s antennas went up when they grew suspicious of a self-employed builder they believed to be receiving undeclared cash payments. What followed was an extensive, invasive, year-long investigation. In the end, the builder was vindicated, with no errors found on his return. However, having not been part of our protection scheme, he was faced with an accountancy bill running into thousands.

Case Study 3: Furlough Support Enquiries

The recent pandemic saw many businesses relying on furlough support grant claims. We’ve had several clients under this category receive enquiries from HMRC. The silver lining? All these clients had our fee protection cover. We stepped in, offering robust assistance, directly dealing with HMRC, ensuring a smooth process. Best of all, the majority had no expenses from their pocket, thanks to our scheme’s underwriters covering our fees.

Case Study 4: The Complex Return

A significant capital gain paired with a substantial claim for tax relief on a client’s tax return landed them in the HMRC enquiry zone. HMRC, armed with a plethora of queries, sought detailed supporting information. Thankfully, the client was under our fee protection cover. After significant back and forth, HMRC was satisfied. So, what was the end result? Zero fees for our client, as everything was covered by the underwriters.

Why Our Tax Investigation Service?

These cases shed light on the unpredictable nature of tax enquiries. By opting for our Tax Investigation Service, you benefit from:

Expertise: Our seasoned team navigates the complexities on your behalf.

Protection: You’re shielded from potentially high accountancy fees.

Peace of Mind: With our fee protection cover, most of our clients pay nothing out-of-pocket, even with the most intricate investigations.

In the ever-changing landscape of taxes, it’s not just about paying what’s due but ensuring you’re protected if tax enquiries arise. So, reach out to us and discover how our Tax Investigation Service can be your fortress against unforeseen tax storms. We’re always happy to help!

If you’d like to speak to one of our experts about your accounts, please call 01243 782 423, or email from our contact page and we will be in touch!

We also update our YouTube Channel regularly with new content, see here: Lewis Brownlee YouTube channel.

Tax investigations can be a daunting prospect for anyone, whether you’re a business owner, freelancer, or an individual taxpayer. But understanding what happens in a tax investigation can help ease anxieties and better prepare you for the road ahead. Let’s delve deep into the intricacies of these investigations and illuminate how you can shield yourself from potential pitfalls.

Triggers for a Tax Investigation

HMRC doesn’t start investigations on a mere whim; specific triggers often prompt them. Some common ones include:

Sudden Changes in Income or Profit: A substantial increase or decrease from previous years can attract HMRC’s attention.

Discrepancies Between Different Returns: If there’s a mismatch between, say, your VAT return and corporation tax return, HMRC might want a closer look.

Inconsistencies with Industry Norms: If your data deviates considerably from what’s typical within your industry, this could raise a flag.

Late Tax Returns and Payments: Regularly missing deadlines might suggest to HMRC that your financial affairs aren’t in order.

Random Selection: Sometimes, HMRC picks out returns at random for investigation, so you could be under scrutiny even if everything’s in perfect order.

The Tax Investigation Process

Once HMRC decides to investigate, understanding what happens in a tax investigation becomes pivotal. Here’s a step-by-step breakdown:

• Notification: The investigation kicks off with a formal notice from HMRC, detailing what they’re looking into and what they need from you.
• Information Gathering: You’ll need to provide all requested records, which might include bank statements, invoices, receipts, and other relevant documentation.
• Meeting: In some cases, HMRC might want a face-to-face meeting. Here, they’ll discuss your tax affairs in-depth.
• Further Investigation: Based on the information you provide and their initial findings, HMRC might delve deeper, asking for more specific documents or clarification on certain points.
• Conclusion: Once HMRC is satisfied, they’ll wrap up the investigation. This could result in no changes, or they could determine you owe additional tax.

Potential Outcomes

After understanding what happens in a tax investigation, it’s crucial to know where you might land once the dust settles. The outcomes vary from case to case but generally-speaking fall into one of the following categories:

No Additional Tax Owed: If HMRC finds everything in order, the investigation will close without any additional tax payable.

Additional Tax and Penalties: If discrepancies are found, you might owe extra tax. Furthermore, HMRC can levy penalties if they believe any underpayment was due to carelessness or deliberate action.

Prior year adjustments: If errors are found, HMRC could well extend the investigation back to earlier periods in the hope of obtaining additional tax, interest and penalty charges.

Shielding Yourself from Investigations

The best way to mitigate the stress and uncertainties of a tax investigation is naturally to have had professionals looking after your affairs from the outset? Prevention and preparation are nearly always key to the success stories around tax investigations. Employing a reputable accountant from the outset ensures your financial affairs are in impeccable order. Furthermore, partaking in Tax Protection Schemes offered by accountancy firms (like ours) can offer invaluable benefits including:

Expert Assistance: You’ll have experienced professionals guiding you throughout the process.

Cover for Costs: Tax investigations can be lengthy and expensive. These schemes often cover accountancy fees.

Peace of Mind: Knowing you’re protected and have experts by your side significantly reduces the stress and anxiety associated with investigations.

So, while the prospect of what happens in a tax investigation can be daunting, being well-informed and having the right protections in place can make all the difference. With the right expertise and safeguards, navigating the choppy waters of tax investigations becomes a much smoother journey. We would love to help you there! So, why not call us today on 01243 782423, and take us up on one of our free introductory meetings to see what we do and how we do it! You have nothing to lose and potentially everything to gain 

If you’d like to speak to one of our experts about your accounts, please call 01243 782 423, or email from our contact page and we will be in touch!

We also update our YouTube Channel regularly with new content, see here: Lewis Brownlee YouTube channel.