Private Client Spotlight: Does your client hold shares in an Investment Company

If so, you may wish to ask them if they have considered Inheritance Tax Planning (IHT) planning and put them in touch with our Private Client Team.

In recent months, the Private Client Team have been establishing Trusts for our clients. This has been for two main reasons:

To reduce the client’s exposure to IHT and

Protection of their assets

The value of shares in an investment company (for instance companies that hold rental properties) could be exposed to IHT at 40% on death. There are no IHT reliefs available as there are for trading companies.

Clients may think they can simply gift their shares, and this will solve the problem. However, where a gift is made (other than cash) there could be significant capital gains tax (CGT) consequences, with most clients wanting to avoid any immediate tax charges up front.

In addition, an outright gift to a child exposes that asset to risk – what happens if the gift is made, and the child’s relationship breaks down in the future – the ex in question could walk away with the asset!

A good solution is to transfer that asset into trust for a class of beneficiaries as this:

Reduces IHT after 7 years

Allows the deferment of CGT

Protects the asset

Whilst speaking and preparing accounts have a think about the shareholder behind that company – would they benefit from a quick friendly chat with the Private Client team? It may well save them a significant amount of tax in the future! Please email Clare Eve directly at clare.eve@lbgroupltd.com