Streamlining the tax planning process for Mr & Mrs MacDonald
We have acted for Mr & Mrs MacDonald for a number of years. Mr MacDonald, a successful businessman, has assets both in the UK and abroad.
Primarily living in London they having a love for the outdoors, and spend the majority of their summers in Scotland visiting the Highlands and Islands.
They have four children in their late twenties to early forties with three married and two having started a family.
After a minor health scare, Mr MacDonald had concerns relating to how his family’s wealth would be managed after he was gone and contacted us for advice. Both Mr & Mrs MacDonald explained that they had a financial advisor who managed their finances and whilst Inheritance Tax planning had been raised before, they hadn’t taken much note of it, until now.
Owning houses in London and Scotland, the couple also had shares in small limited companies, a considerable holding in a large public company as well as other investments. They also owned some rural land in the Highlands with some fishing rights, some woodlands and had property overseas. They were unsure of the total value of all of their financial interests, and so we liaised with their other professional advisors to pull the relevant information together.
From this we produced a report outlining exactly how much Inheritance Tax would be due on their death and what reliefs may be available against their assets. We then outlined and discussed their priorities and whether anything could be done now to assist. They explained that their main aim was not in fact to reduce Inheritance Tax, but to see their children (and grandchildren) enjoy some of their wealth now, rather than when they were gone.
Due to only spending their summers in Scotland, they decided to gift assets including some of the shares (private and listed) as well as the house and land in Scotland to their children now. Both were concerned that the spouses of their children could claim some of these assets in the unlikely event that they were to separate or divorce. We therefore recommended discussing with our Family Law team who advised on this aspect.
We also had to consider the title to the rural land, the property in Scotland and how the transfer was to be structured. The transfer resulted in a first registration in the Land Register of Scotland, drawing on the expertise across our firm, our Land and Rural team provided guidance throughout.
We also advised on the land tax implications of this transfer and considered whether the (then new) Additional Dwelling Supplement would apply. Some of the assets being transferred held Capital Gains Tax losses and we provided advice on how best to structure the transfer to make use of these. Our Corporate team were able to provide advice on the transfer of the private limited shares, the terms of the various shareholder agreements and how this should be best structured.
After various discussions with our teams, we reported back to Mr & Mrs MacDonald with a recommendation as to how these gifts would be best structured, taking into account all legal and tax aspects, as well as practical considerations. Agreeing to the recommendation, the project was managed by our tax planning team who worked closely with the couple’s accountant and financial adviser.
On completion of the project, Mr & Mrs MacDonald’s estimated Inheritance Tax liability was reduced by approximately £1million. They also managed to use their Capital Gains Tax losses. More importantly though, their assets will stay within the family, and they will be able to see their children and grandchildren enjoy them. Sharing their feedback at the end of the project they said “the whole process was made as painless as possible and we were extremely impressed by the seamless co-ordination of the whole project”.