Impôt sur les successions immobilières - Impôt sur les propriétaires fonciers au Royaume-Uni

A major concern for landlords is how to avoid Inheritance Tax on property. When speaking to landlords, much like myself, they seek long-term capital growth and to supplement their current and retirement income with a view to protecting their property wealth and passing on the assets to their children whilst avoiding high rates of personal tax on the income. An overriding concern is that they wish to retain control over the properties during their lifetimes so that they can carry on receiving the income right up to that date of death. They also wish to ensure that the property wealth is protected for their bloodline and is not attacked by future partners of their children should they divorce. In the tax profession, Inheritance Tax is known as the tax of choice. That is, you can choose to pay it or not pay it. By taking advice early or as soon as possible an effective Inheritance Tax plan can be put in place to help you avoid Inheritance Tax and ensure your wealth can be passed on to the next generation and protected for the generations to come. So, let’s take a look at how to avoid inheritance tax on BTL property by looking at the position of ownership in your personal name or through a limited company Personal name The "do nothing" approach or I will not be here so it does not affect me..! On death, the net equity in your investment properties will be included as an asset in your estate for IHT purposes. For example, if you pass away leaving a portfolio valued at £2m on which there is an outstanding debt of £1m your IHT would be 40% of £1m £400,000. You do get a £325,000 nil rate band which can go up to £500,000 if you are leaving your main residence to your children and grandchildren. This can go up to £1m for married couples but for our purposes, we have assumed that these nil rate bands will have been used up against your main residence. It does not take much these days for you to have your own home worth more than £650,000. Gift property to your children A gift of any of the rental properties can be made to your children at any time. The consequences however would be:- An immediate charge to Capital Gains Tax as the transfer value is always deemed to be at the market value at the time of the gift. This will now have to be reported and paid within 60 days. A loss of the rental income. Once gifted you can no longer receive any of the rental income other this would become a gift with reservation and would fall back into your estate for IHT purposes. You would need to survive for 7 years for the asset to fall entirely out of your estate for IHT purposes. Your children may not wish to have ownership in their personal names as the income would push them into a higher tax bracket or they are already higher rate taxpayers. There is limited protection of the assets from attack by future partners of your children in the case of divorce If there is a mortgage lender in place permission will need to be obtained for the transfer. This is unlikely so your children will need to apply for mortgages and it therefore realistically restricts you to property that has no mortgage. All in all, not a very appetising outlook. Transfer to a Discretionary Trust This is an option but beware of the following limitations:- You would need to survive for 7 years for the asset to fall entirely out of your estate for IHT purposes. If there is a mortgage lender in place permission will need to be obtained for the transfer into the trust. This is unlikely to be granted and it therefore realistically restricts you to property that has no mortgage. A maximum of £650,000 (per married couple) can be transferred without incurring an immediate 20% tax charge on any excess. A further £650,000 can then be transferred after 7 years and so forth. For someone wishing to transfer say a £1m portfolio, this would require them to survive at least 14 years to eliminate the IHT. The capital gains tax on a transfer to a trust can be held over and the asset passed out to your children who also agree to the CGT holdover. This however is merely kicking the can down the road for your children to deal with. If your children wish to sell the property, they would face CGT based on your original purchase price. Rental income profits in a trust are taxed at 45% There will be IHT exit charges if the property is to be transferred from the Trust to the children in the future There will be a 10-year IHT charge on the assets held by the Trust above the IHT nil rate band at a maximum rate of 6%. This is repeated every 10 years for the lifetime of the Trust The Trust will need to register with HMRC and will need to complete a Trust Tax Return each year When transferring property into the trust you can no longer receive any of the income if you wish to avoid IHT Sale and re-investment A sale of the properties and a reinvestment of the funds into a Business Property Relief Investment portfolio. This, in our opinion, is high risk, and no option death bed planning, but if you were to then survive 2 years the investment can be passed on to beneficiaries on death free of IHT. However, Capital Gains Tax is still payable on the sale so a realistic assessment should be made as to the cost/benefit v the risk. Many of the investment vehicles are listed on the AIM or Footsie 350 listing. The risk is the shares may drop in value during your lifetime or the company itself fails and is liquidated in which case you will have lost everything. Inheritance Tax and limited companies Set up correctly, a limited company can reduce your Inheritance Tax exposure. At the same time, you can retain full control during your lifetime, full access to income and implement a shareholder agreement to protect your property wealth for your children. Freezer shares You should consider a form of planning using “freezer” shares. The intention is to freeze the value of the shares belonging to you so that future growth in value accrues to their intended beneficiary - typically the next generation. This is achieved by altering the company’s Articles of Association to divide the company’s shares into two classes, A and B shares. The A shares carry an entitlement to dividends and/or capital on winding up equivalent to the current value of the company and are retained by you. The important thing to note here is that when incorporating the company, your current value is equivalent to the nominal value of your A shares. i.e. £1 per share as there are no other assets in the company. All future growth in the value of the company will accrue to the B shares which will be given to your children or perhaps to a trust that benefits succeeding generations. At this point, there should be no IHT implications inherent in this planning. The new B class of shares will have only a nominal value as initially they have no voting rights, no dividend rights and no capital value above their face value. There has been no significant transfer of value because the value of the existing shares is not substantially reduced. On your death, you will be taxed only on the value of the company at the date the two share classes were created. The same approach can also be used where you have already acquired properties. In this case, a valuation would need to be carried out first to ascertain the current value of your shares. Take advice now Before deciding whether to buy property in your personal name or through a limited company it pays to know how to avoid inheritance tax on BTL property so that you are not trapped with unpalatable choices later in life. Get in touch and speak to us. Setting up a smart structure can be done from as little as £500+VAT. If you are serious about protecting wealth, please get in touch on 0800 907 8633, via tax@fixedfeetr.com or online. If you enjoyed this post, why not check out our post on HMRC mortgage interest relief 2020/21 or our guide to residence nil rate band 2021/22?

Droits de succession sur la propriété

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L'approche «ne rien faire» ou je ne serai pas là, donc ça ne me concerne pas..!

Faites don de biens à vos enfants

Transfert à une fiducie discrétionnaire

Vente et réinvestissement

Impôt sur les successions et sociétés à responsabilité limitée

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