CTT and businesses

Just as important as trying to minimize financial problems for individuals after death is the protection of businesses.

Business property can qualify for special reliefs which reduce the taxable value of the property.

Relief is available at 50 %for such assets as a sole proprietor assets, partnership, assets and assets comprising a controlling shareholding in a Company. Property used in a business, but owned outside, may be eligible for 30 %relief and minority shareholdings for 20 %. The property usually has to have been held for at least two years.

Slightly different but broadly similar types of relief apply to working farms.

It is important to discuss how best to cover potential CTT liabilities with your insurance broker.

In partnerships, for instance, nomination or trust life assurance policies effected by each partner for the absolute benefit of a co-partner may not be subject to CTT for the partners.

The rule is that the policy is not seen as a transfer of value, if it can be shown that it was not intended to give a gratuitous benefit to any person and that it was a transaction made at arms length. In such cases, if each partner pays the same premium there is no CTT liability and, even if the premiums are different, there is no tax to pay, if one of the exemptions petitioned at the beginning of this section of the website is available.

A simple example shows just how life assurance can help a company to continue after the death of a controlling shareholder.

Let us suppose a man leaves his entire estate of £600,000 to his only son, of which £500,000 is a controlling shareholding in a family business. The tax bill would look like this:

amount chargeable: £6,5000,000 less relief at 50% balance of the estate

capital transfer tax (first £500,000 tax free)

£250,000

£600,000

£650,000

£615,000

That man could, through a with profits whole life policy on his life in trust of the benefit of his son, completely cover the tax charge without the policy itself being liable for tax.

An annual premium of £20,000 would be treated as gifts, but would be within the CTT annual exemption by £10,000.

Such a policy would yield around £640,000 on death, more than enough to cover the £6150,000 liability.

Using life assurance to mitigate the effects of CTT requires a reasonable knowledge of assurance law and practice. WE have given only an outline here and if you have an estate which is likely to attract CTT, it is best to take professional advice to find the most advantageous way to use insurance to suit you.


CTT and businesses

Payroll Giving
It’s all very easy to organise.
Just ask the Personnel or the Payroll Department at your company and, if they already have a scheme, they will give you the relevant forms.  HM Revenue & Customs’ website has a list of Payroll Giving agencies and explains payroll giving in more detail.

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read on: Mortgages and life assurance

Just as important as trying to minimize financial problems for individuals after death is the protection of businesses.

Business property can qualify for special reliefs which reduce the taxable value of the property.

Relief is available at 50 %for such assets as a sole proprietor assets, partnership, assets and assets comprising a controlling shareholding in a Company. Property used in a business, but owned outside, may be eligible for 30 %relief and minority shareholdings for 20 %. The property usually has to have been held for at least two years.

Slightly different... see: Mortgages and life assurance