Business Property Relief (BPR).
Individuals can put £1M worth of shares in a private limited company (provided it’s trading rather than investing and has been owned by the individual for at least two years) into a trust before the sale of a business.
This is a fantastic opportunity to “bank” the relief (which is lost post sale as the shares will be converted to cash on a sale and this cash would not qualify for the relief).
This is particularly beneficial given that individuals are only able to put £325,000 worth of assets into lifetime trusts every seven years. Anything above that is subject to an immediate lifetime Inheritance Tax charge at the rate of 20%.
The Benefits of Trust Structures.
- Asset protection – by using a trust structure rather than an outright gift, you can provide your beneficiaries with a level of asset protection. This is because the assets will sit inside the trust (rather than in the names of the individuals that are due to benefit).
- Flexibility – a trust allows people managing the trust (known as “trustees”) to decide whether or not it is appropriate for the beneficiaries to benefit from the trust assets at any given time.
- Tax planning opportunities – by using a trust in the way described above, you can (as an individual) ensure that your assets are left in a more tax-efficient way. This is because, by having a trust owning the assets (rather than individuals, such as your children), the value remains outside of their respective estates and so will not be taxed on their deaths for IHT purposes. This is an effective intergenerational wealth planning opportunity that should not be overlooked.
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Partner
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