27 February 2020
Inheritance tax (IHT) has long been considered a voluntary tax, in that during an individual’s lifetime, structures and planning can be implemented and adopted such that the size of an individual’s estate at death is of such a value that IHT does not bite.
Individuals are becoming all too aware of lifetime giving, Business Property Relief exemptions, availability of Nil rate bands and the like, but now one piece of planning appears to have caught the eye of HMRC, so much so that a whole unit has been set up to look into it.
Family Investment companies (FICs) have attracted attention, as these are perceived as being set up to avoid IHT by attempting to convert assets of a family, that would normally attract IHT on a death, into assets that either have little value or attract IHT exemptions.
FICs have been set up by family units with Mum, Dad, and adult children generally being shareholders of some kind. These then become vehicles for holding assets like stocks and shares, for example, to attract a more favourable tax treatment for those assets.
HMRC are starting to look more closely at these arrangements to ensure that the FICs, which still do have a valuable role to play, are not being exploited for tax purposes.