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Tax Planning & Trusts

The interaction of pensions and divorce is complex, and despite recent changes in legislation, it continues to pose difficulties in finding a solution to disputes over pension rights. As pension assets have grown in value, the mechanism for dealing with a divorcing couple’s pension and non pension assets has become more significant.

PPTC specialise in the following key areas of tax planning:

• Income Tax
• Capital Gains Tax
• Inheritance Tax

When considering the amount of tax paid throughout an individuals lifetime – Income Tax and National Insurance on earnings; Capital Gains on profits achieved; Value Added Tax on goods purchased and finally on death - the payment of Inheritance Tax on your accumulated estate. It is certainly true to say that HMRC will always have the final say. PPTC aim to assist in the mitigation of any liability to tax in the most appropriate method possible through specialist tax planning.

Income Tax

Income tax is an annual tax on income levied by the Government. Every UK resident is entitled to a personal allowance before the relevant tax rates are applied. As highlighted in the Pre Budget Report, as of 6^th April 2008 the new rates of income tax will be 20% and 40% for earned income. Unfortunately different rates of tax will apply for all other types of income and PPTC are able to identify the most efficient tax planning options available to you.

The Chancellor also announced changes to the residence and domicile rules. The choice of an annual charge of £30,000 (for those resident for at least seven out of the past ten tax years) or of moving to the normal arising basis of UK taxation is proposed from April 2008. This is in recognition of the fact that individuals using the remittance basis make no contribution to the Exchequer in respect of their unremitted foreign income and gains. PPTC will assist in establishing the most economical options available to an individual regardless of their residency or domicile status.

PPTC also work closely with a number of specialist providers in achieving income tax relief where ever possible.

Capital gains tax (CGT)

Capital gains tax is a tax on gains arising from disposals of certain capital assets. The tax is levied on the total of all chargeable gains accruing to a person on the disposal of assets in that tax year, after deduction of losses. Tax is charged on the person making the disposal, not on the person receiving the asset. Spouses and civil partners are taxed individually on their own gains.

The recent Pre Budget Report (PBR) announced radical changes applying from April 2008, namely:

• Any disposals on or after 6^th April 2008 there will be a single rate of CGT of 18%
• Taper relief (for both business and non business assets) and indexation allowance will be withdrawn.
• For disposals before this date, the current rules will continue to apply.
• The above changes apply to individuals, trustees and personal representatives.
• The annual exemption (currently £9,200) will remain in place.
• On the 24^th January 2008 the Chancellor announced that there would be a 10% rate on Capital gains of assets up to £1 million for small businesses.

PPTC are able to produce CGT computations and are constantly reviewing legislation changes which allow us to create a specialist service in reducing an individuals or company’s CGT liability. 

Inheritance Tax

Many people still believe that Inheritance Tax (IHT) is only for the rich, however it is predicted that approximately 40,000 estates a year will be liable to Inheritance tax (IHT).

Inheritance tax is a tax which may be charged on a transfer of value from one person (the donor) to another (the donee). The tax may be levied:

• At the time of the transfer; and/or
• Upon the death of the donor; and/or
• As a consequence of the actions or inactions of the donee.

IHT may be levied at rate of up to 40% on all assets over the nil-rate band, if available. Unfortunately, in many cases IHT is payable on an estate where it could easily have been avoided, PPTC can provide the solutions to suit your needs.

Inheritance Tax has many exemptions and reliefs, however are you taking advantage of them? PPTC offer a bespoke solution to Inheritance Tax with a comprehensive range of solutions available which, individually or in combination, can achieve most people's objectives and circumstances in reducing the level of liability to IHT.

A recent change proposed by the Government highlighted in the Pre Budget Report now means that if a husband or wife’s IHT allowance is unused, or only partly used, when they die then their surviving partner can add it to their own allowance when they subsequently die too. Thus up to £600,000 worth of assets can be passed on before the inheritance tax is levied on the remainder of the estate. It is important to note that this does not mean the nil rate band has increased to £600,000, it simply means the NRB will be transferable to spouses if not used on first death.

Trusts - A trust is a way of arranging property for the benefit of other people without giving them full control over it. There may be a number of different reasons for arranging a trust, however predominately a trust will be created to mitigate some form of taxation. PPTC are able to provide technical advice in recommending suitable trust arrangements whether it is for tax mitigation, protection or simply to maintain control of a specific asset. The main trust we specialise in are:

• Discounted Gift Trust (Flexible and Bare)
• Discretionary Trust
• Flexible Trusts

As PPTC work closely with specialist Trust and Tax lawyers, we are able to provide a simple solution to a complex problem. If you would like help then you can contact us to arrange an exploratory, no obligation discussion which would indicate the extent of your potential liability and how PPTC can help.