Industry Eye: Be prepared for the introduction of new tax regime
HMRC have established a study programme which is expected to report by October 2011 giving the opportunity to introduce specific legislation shortly thereafter.
Contrast this with current experience where HMRC appear to be instructed not to waste resources where there is little tax at stake and can instead rely upon the behaviour penalty regime introduced from April 1, 2008, e.g. if you get it wrong and they find out you pay an appropriate penalty.
Areas that particularly excite HMRC are:
1 Undervaluation where no IHT reliefs are available.
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Hide Ad2 Over valuations where there are reliefs and a high value could benefit in the future for capital gains tax.
3 Incorrect claims for agricultural property relief (APR) and business property relief (BPR) where either none is due or claims are excessive.
All of these could come within the penalty regime under present legislation and probably under any arising from the current study. What to do?
Any challenge by HMRC has more chance of being defeated if you have complete records of all gifts and capital transactions which are relevant to your estate. Therefore, accurate records of transactions and events kept throughout your lifetime will support your claim for relief and assist your valuer in establishing the appropriate values.
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Hide AdIn this respect a note of local transactions/events, such as, failed planning applications for development of redundant farm buildings in your immediate area can be invaluable. During your lifetime ensure that you are complying with the current understanding of the legislation by regular checks with your advisers, with whom you will have presumably worked out an inheritance tax plan!
APR/BPR for inheritance tax remain the most valuable asset to a farmer when passing on the estate to the next generation. Efforts to preserve that relief through continuous review with appropriately experienced practitioners will prove a worthwhile investment for many years to come.
May I wish you a happy Christmas and prosperous New Year!
Patrick McCreanor: Agriculture director for accountancy firm Baker Tilly. email: patrick.mccreanor@ bakertilly.co.uk, or tel: 0113 2855000.
CW 18/12/10