Iain Wallis

Proven Tax Strategies for High Net Worth Individuals

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Landlord & Letting Show Coventry 26-27 November

October 28, 2014 By Iain

Finalist Logo GeneralWe will be exhibiting at the Landlord & Letting Show taking place at Hall 2, Stoneleigh Park, Coventry, on Wednesday 26th & Thursday 27th November 2014, and we hope you can join us! Maybe on day two help us celebrate as we are finalists in the prestigious Landlord & Letting Show Awards with the winners to be announced during the show.
It’s free to attend and the event aims to educate and inform property professionals by offering access to:
• A comprehensive product and services exhibition

• Free seminars covering a wide range of topics delivered by leading industry experts.

• There are two presentations from me entitled “5 Top Tax Tips to Legally Avoid Property Taxes” one on Wednesday at 11.30 and one on Thursday at 14.00. These are always full so be sure to be there in plenty of time

• Associations and Government Bodies
• Fantastic networking opportunities
• Information on the latest legislation
Visit the website at http:www.warwickshire.landlordshow.info to find out more and book free show tickets, then come along and visit us on stand 38.

Always happy to chat legal tax avoidance and share the love.

Filed Under: Capital Gains Tax, Inheritance Tax, Marriage, personal tax, property investment, property tax, speaker, Tax avoidance, Taxation, Uncategorized Tagged With: capital gains tax, flipping, HMRC, income tax, inheritance tax, Inheritance tax Jimmy Carr K2, Self Assessment, tax avoidance, tax evasion, Tax Return

Be careful how you treat Grandma’s house

June 27, 2014 By Iain

Have you noticed how the recent rise in house prices has encouraged a spot of optimism and got everyone to talk up the value of their property? All well and good until someone inherits a property and then the value rather interestingly seems to head the opposite way, downwards!

Understandable maybe, because with the Inheritance Tax (IHT) nil rate band remaining frozen at £325,000 and the rising property market pushing middle England into the arena of Inheritance Tax; next of kin are keen to make sure they don’t hand over too much IHT to the tax man. Regardless of who you are HMRC will take a flat 40% of all your estate over £325,000. OUCH!

A note of caution though, in 2012/13 HMRC collected an extra £108 million of IHT by challenging and “adjusting” property valuations. They have the right to investigate valuations and over the last few years have been exercising this more aggressively than in the past. This trend is I’m sure going to continue given the improving state of the property market and HMRC coming under even more pressure to maximise revenues.

HMRC has four years from the end of the tax year in which someone dies to challenge an IHT calculation, longer if it can prove that executors did not ensure the calculation was correct or they had been perhaps ‘negligent’. This gives them plenty of time to check and compare similar properties with the Land Registry. So, take care! If you decide to sell granny’s house not long after the funeral for a price markedly higher than the value declared on the IHT form you could be heading for trouble. If you declare a value which seems low compared to what granny paid for it beware! Both will raise the suspicions of HMRC and could see you with a fine of up to 100% of the extra liability. The average amount of tax collected from this type of investigation in 2012/13 was £34,000 – imagine yourself as a beneficiary and having to find that amount of extra tax totally out of the blue!

As with all IHT planning, it’s all about being prepared. If you’re a beneficiary or an executor of an estate take steps as soon as you can to record the condition of the property i.e. by taking photographs and keep records of any repairs you undertake.

Whilst it will cost you in fees, these could possibly be reclaimed from the estate later, have a professional valuation undertaken by a Chartered Surveyor, who specialises in valuing land and buildings for people’s estates. Ask them to provide a realistic price of the property’s market value – the ‘open market’ value and ensure they take into account anything which might increase or decrease the value, such as:

a) If the property is in need of repair, ask the valuer to consider reducing the value to take this work into account.

b) There may be something about the property which makes it particular appealing to buyers i.e. an unusually large garden or access to other development land. If the property has features which make it more attractive then the valuation may need to increase.

It’s probably less likely that HMRC will challenge a valuation carried out by a Chartered Surveyor, compared to one say done by the local estate agent or by yourself, so it may be worth paying someone to give you that peace of mind.

It’s not all bad though, if you discover that the property had been over valued at the time of probate and sold for less, then you have up to four years from the death to claim the IHT overpayment back from HMRC.

If you need any help with IHT planning, or are interested in receiving further information or booking a strategic session with Iain, please contact Jacqueline on 0191 206 4080 or email admin@iainwallis.com.

Filed Under: Inheritance Tax, Tax avoidance, Uncategorized Tagged With: HMRC, inheritance tax, Inheritance tax Jimmy Carr K2, North East, property investing, tax avoidance, tax evasion

Jimmy Carr K2 and Tax Avoidance

June 22, 2012 By Iain

The Jimmy Carr Debate

Leaving aside the moral debate about Jimmy Carr, K2 and tax avoidance let’s bring you some less controversial tax planning around the subject of death which will happen to all of us at some stage.

Estate planning is not simply about Inheritance Tax (IHT).

Bear in mind that in your eagerness to avoid IHT you may trigger a liability to Capital Gains Tax (CGT).

When planning to avoid Inheritance Tax (IHT) the general view and practical approach is to reduce the value of your estate that is subject to IHT. The easiest and simplest way to do this is to give away as much wealth as you can as soon as you can. Assuming that you survive for a further seven years, then the value of that gift will fall out or your estate and you have potentially saved 40% of its value.

Sounds good so far but be careful for the gift of an asset to a connected person, except your spouse, will be treated by the taxman as a deemed sale at market value. So maybe you have a holiday cottage in the beautiful county of Northumberland that you have owned for years and maybe paid £30,000 for in 1985 but no longer need, a simple gift to the children or grandchildren of the asset now worth £130,000 will create a capital gain of £100,000 (OK  adjusted for acquisition and disposable costs and maybe some improvements). So a potential tax bill of 28% of the gain. Ouch!. Even worse were the donor not to survive the seven year period the estate could potentially be looking at a further 40% IHT. Double ouch!!

Deathbed Gifts

Forgive for the slightly morbid nature of deathbed planning but tucked away in the legislation is a wonderful rule the enables certain gifts to be ignored for CGT .In case you were not aware, gifts from a will are not subject to CGT.

Deathbed gifts, or to put it another way gifts made in contemplation of death, known as “donatio mortis causa” (DMC), count as transferred at the date of death.

For a gift to be considered as DMC three factors must be present at the time:

 

  • it must be made in contemplation of death but not necessarily expectation. For example, someone undergoing a serious operation might contemplate the possibility of death even though they hope and expect to survive

 

  • the gift must only become a permanent one where the person making the gift dies. In other words they have the right to take back the property in the event they survive

 

  • the assets in question must be passed to the beneficiary of the gift, a mere promise is not enough; there must be physical transfer. Transfer is effected by delivery of the actual property and must be made to the donee, or someone on their behalf. The donor must part with control and not merely physical possession of the property. For example, the delivery of title deeds (kept in a steel box, the key to which had been given by X to Y during her visits to the hospital during X’s illness) amounted to X’s parting with control over the house. Or A’s terminally ill father, B, told A to keep the keys to B’s car, which A used regularly was seen as effective delivery.

 

As always with estate planning it is a difficult and sometimes a very emotive subject, but bear in mind in trying to dodge the issue of estate planning could leave your beneficiaries with an unexpected double tax charge and the last thing you want is the taxman snapping at your heels having lost a loved one.

Tax Planning

As ever with tax planning seek professional advice as everyone’s circumstances are different.

Finally never forget that tax avoidance is legal. Any professional advisor not doing their utmost to provide their client with opportunities to legally reduce a tax liability has failed in their professional duties.  It is for the client to decide with their moral compass whether they wish to pursue that route.

Filed Under: Capital Gains Tax, Inheritance Tax, Taxation, Uncategorized Tagged With: capital gains tax, Inheritance tax Jimmy Carr K2, Northumberland, Run DMC

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