Planning for the future
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Hello,
I met with a new client recently who's previous accountant is retiring.
She's a sole trader who owns her house outright as well as a buy-to-let property which is owned jointly with her partner. She has 2 daughters (18+) who are currently at uni. Business profits are £50k - £70k.
The first advice I gave her is that she should seriously consider incorporating the business as this would bring significant tax savings, as well as offering some protection should she ever get sued (an inherant risk in a line of work she's wanting to expand into). So my first question is whether she should consider bringing in her two daughters and/or her partner in as shareholders and/or directors. On the surface this seems like a good idea - are there any major risks I may have overlooked here?
Secondly, the client is now in her 50s and is wanting some IHT planning, as the value of her estate is well in excess of the IHT threshold. Would it be sensible for her to consider putting the property in a trust with her daughters as beneficiaries?
Lastly, is there anything she and her partner can do now to minimise the CGT when they come to sell the buy-to-let property in the future?
Thanks
Jodie
I met with a new client recently who's previous accountant is retiring.
She's a sole trader who owns her house outright as well as a buy-to-let property which is owned jointly with her partner. She has 2 daughters (18+) who are currently at uni. Business profits are £50k - £70k.
The first advice I gave her is that she should seriously consider incorporating the business as this would bring significant tax savings, as well as offering some protection should she ever get sued (an inherant risk in a line of work she's wanting to expand into). So my first question is whether she should consider bringing in her two daughters and/or her partner in as shareholders and/or directors. On the surface this seems like a good idea - are there any major risks I may have overlooked here?
Secondly, the client is now in her 50s and is wanting some IHT planning, as the value of her estate is well in excess of the IHT threshold. Would it be sensible for her to consider putting the property in a trust with her daughters as beneficiaries?
Lastly, is there anything she and her partner can do now to minimise the CGT when they come to sell the buy-to-let property in the future?
Thanks
Jodie
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Comments
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Re:Planning for the future
I can't see any major risks associated with appointing her partner/children as directors/shareholders. It is fairly common practice. In terms of the risk element I would just ensure a shareholder agreement is put in place to protect eachother maybe?
With regards to trusts - I would advise you or your client to seek specialist advice in this area. The government have recently brought in anti-avoidance legislation under the pre-owned asset rules which contain a sting in the tail where property transferred to a trust continues to be lived in. The chances are it won't be worth your client pursuing this especially as she is only in her 50's.
Kind regards
Steve0 -
Re:Planning for the future
appologies for not thanking you sooner for replying - Trusts are indeed something of a minefield so I have suggested that she speaks to someone else regarding that.
Jodie
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Re:Planning for the future
No problem Jodie. Trusts are very complex and need a lot of planning - it's not something which you can advise in detail on this site as the overlap between the various different types of taxes (IHT/CGT/IT etc) means a considerable amount of planning has to take place.
Best regards
Steve0 -
Re:Planning for the future
I know it is quite a while since this post but can I add my two pen'orth?
A lot of people talk about trusts but trusts can and are often attacked by HMRC.There is another way around it. Has your client considered a foundation?
These are a lot safer than trusts and under current tax law are not open to attack by the revenue. I am not an expert but my boss is one of the leading foundation specailists in the country.
If you would like to PM me some contact details, I will put you in touch.
Regards
Peter
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