Breeze & Wyles Solicitors expands its corporate offering in readiness for RDR deadline

Breeze & Wyles Solicitors LLP has expanded it corporate offering in readiness for the run up to the Retail Distribution Review deadline for commencement of 1 January 2013.

If you are an Independent Financial Advisor with a client bank and do not wish to continue to trade post the deadline you can contact our Brendan O'Brien at brendan.obrien@breezeandwyles.co.uk or on 01279 715322 or 07985468101 for a 24/7 confidential discussion.


Give more to pay less tax!

By Hardeep Nijher estate planning expert with Breeze & Wyles Solicitors LLP

With a new approach to inheritance tax law, the Government aims to boost gifts to charity. But encouraging people to give more away can also benefit their children and others who stand to inherit. Here, legal expert Hardeep Nijher of Breeze & Wyles Solicitors LLP provides an update on the latest changes and how they can be used to benefit both charities and those inheriting.

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Giving money to those in need, rather than the taxman, is likely to have universal appeal.

So the news that donating to charity can result in a lower tax bill sounds like uncharacteristic cost-cutting behaviour from the taxman - but that’s the effect of a recent change in inheritance tax law, where money is being left to charity.

It’s a new regime which was announced last year by the Government, which saw the introduction of an Inheritance Tax rate of 36% where 10% or more of an estate is given to charity.

Now in force, it applies to any death taking place on or after 6th April 2012, and even if the opportunity wasn’t planned for, executors and beneficiaries can still elect to take advantage of the change in the law.

To understand how it works, we need to look behind the banner as the new rules divide a person’s estate into three possible component parts, which has a big impact on the relevant figure used for the bottom line calculation. So although it may seem that 10% is a big chunk, it is unlikely to need to be anything like 10% of the headline figure of the value of the estate.

Firstly, there’s what is known as free estate, that is, what the deceased owned in their own name.

Secondly, joint property passing to the surviving joint owner, for example a house or bank account jointly owned with their surviving husband or wife.

And thirdly, interests under a trust, for example a right to live in a house or a right to receive the income from a portfolio of shares.

The taxman then looks at each of these individual component parts to assess whether the 36% tax rate may be applicable on tax due, where 10% of that particular component part is given to charity.

And it doesn’t stop there. In calculating the 10%, there are other things that may be taken out of the equation. For example, property that attracts other exemptions or reliefs is disregarded. These include the nil rate band (the first slice of your estate that is allowed to be passed on before inheritance tax kicks in, which is currently £325,000); or the surviving spouse exemption or agricultural or business property relief.

The effect is to dramatically change the amount that is used for the 10% calculation – so although a charitable gift might appear to be much less than 10% at first glance, after all the sums it might yet be enough to qualify for the new lower tax rate.

So how does this work in practice? Let’s take a simple example and work through the calculations:
John dies owning:

· A trading business – or this could be a farm - valued at £5,000,000
· A half share in a London flat - the total value of which is £500,000
· Cash and investments worth £1,000,000

In his will he leaves:

· The business/farm to his son
· His share in the flat to his wife, who owns the other half share
· A further lump sum of £500,000 to his wife
· £25,000 to charity
· The rest of the estate to his daughter, i.e. the remaining cash / investments

In this example, it looks as if the gift to charity is a very small proportion of the estate. But let’s work through the sums.

Firstly, the gift of the business or farm to the son is ignored because it attracts 100% business property or agricultural relief.

Secondly, the gifts to the wife are ignored because they attract the surviving spouse exemption.

And finally, the nil rate band is deducted from the remaining £500,000 leaving £175,000 (remember, the nil rate is how much of an estate attracts a zero tax rate – currently £325,000).
So now we can see that the gift to charity is actually worth more than 10% of the ‘bottom line’ figure for the estate of £175,000 - so in this example, the ‘free estate’ component would attract a tax rate of 36%.

This new regime can be extremely attractive for those who want to give significant sums to charity and if you get the sums right, large amounts can be given to charity without any loss to the beneficiaries.

If you get the sums right, making a gift of 10% of the estate, can leave the beneficiaries with exactly the same amount as if there were a gift of 4% of the estate to charity. The increase in the charitable gift is paid entirely by the tax saved.

So in the example above, making a £25,000 donation to charity leaves the daughter with exactly the same amount after tax as if the charity had been given £15,000, keeping it at the standard 40% inheritance tax rate, so there’s an incentive to give more away to get the lower tax rate, for a win-win situation.

The message is that if you want to make a substantial gift for charity, this can be paid for by the tax saved.

Yes, the calculations can seem a bit tricky but I would expect that there will be an increase in post-death variations of wills, where executors and beneficiaries agree that it would be better to make a donation to charity which hits the 10% mark to bring a resulting cut in the inheritance tax rate – and that is perfectly acceptable under the new rules.

But for anyone who is currently undergoing estate planning, and wanting to take advantage of the new rules, the best option is to do a new will that is tailored specifically to this new regime.


It’s not often that the taxman offers to cut the bill, and if it means your favourite charity gets to give more help where it’s needed, it’s not an offer to dismiss lightly.

ENDS

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Web site content note:
This is not legal advice; it is intended to provide information of general interest about current legal issues.


Yellow is the new green when it comes to town planning

The classic image of a village green is one of a grassy space, shaded by oak trees; a game of cricket played while boys sail their toy yachts across the duck pond - but now the High Court has ruled that a village green does not have to be green.

In a case that could prove a stumbling block to property developers, the Court has taken a very broad view of what can constitute a ‘village green’ – a status which grants public right of access and use – which could give objectors the potential to prevent future planning applications.

The case involved West Beach at Newhaven which had been registered as a village green by East Sussex County Council on the basis that it had been used for recreation by local residents for over twenty years.

Newhaven Port Authority, the owner of the beach, wanted to fence it off because the sea wall was in a state of disrepair, and applied for judicial review of the decision to register the beach. But the court ruled that neither lack of grass nor the fact that it was covered by the sea twice a day prevented West Beach from being a village green for the purposes of the Countryside and Rights of Way Act 2006.

This Act says a person may apply to register a piece of land as a village or town green if a significant number of local inhabitants have indulged in sports or pastimes on the land for at least twenty years, and are still doing so at the time of the application, or were still doing so within certain time limits.

Said property law expert John Appleton of Breeze & Wyles Solicitors LLP : “The definition of a village green in the 2006 Act is very wide; what matters is not the nature of the land in question, but how it is used. The case is important to property developers because the courts seem to take a very inclusive view of what is a town or village green and the fact that the wording of the 2006 Act is quite vague, there is some concern that objectors to potential planning applications might seek to register land as a village green to prevent development.”

ENDS

Web site content note:

This is not legal advice; it is intended to provide information of general interest about current legal issues.

Newhaven Port and Properties Ltd v East Sussex County Council
Countryside and Rights of Way Act 2006