Taxation

Question 1

What is Inheritance Tax (IHT)

Answer 1

A tax payable, above a certain threshold on somebody’s estate upon death.

Question 2

What is said threshold for IHT?

Answer 2

There is a Nil Rate Band of £325,000 in Scotland

Question 3

What IHT relief are you aware of?

Answer 3

• APR
• BPR
• PET (Potentially Exempt Transfer)

Question 4

What is APR?

Answer 4

An IHT relief in which agricultural land and property can be eligible for, meeting certain criteria:

• the owner has farmed and occupied toe farm for 2-years
• the owner has owned and let the farm for agricultural purpose for more than 7-years
• only the ‘ag value’ applies

Question 5

Are farm tenancies eligible for APR?

Answer 5

Those granted after the 1st of September are eligible for 100%

Those before 50%

Question 7

Are farm houses and cottages eligible for APR?

Answer 7

House - if proportionate to the farming operation (Higginson v Anthrobus)

Cottages - if occupied by ag workers

Ag value will be used. Usually 30% of the MV

Question 8

You mention BPR, what do you know of this?

Answer 8

An IHT relief on Business Assets

• including tenants stock and machinery.

Question 9

What might trigger BPR on a farm?

Answer 9

A change from agriculture in a diversification project.

Question 10

What is a Potentially Exempt Transfer (PET)?

Answer 10

When an asset is gifted 7-years prior to the death of an individual. if the gifter dies before the 7-year threshold, taper relief will come into play.

Question 11

What do you know of taper relief?

Answer 11

20% - 3-4 years
40% - 4-5 years
60% relief - 5-6 years
80% relief - 6-7 years

Question 12

How else could you avoid IHT?

Answer 12

Through the gifting of assets to a spouse or civil partner.

Question 13

And finally, to whom is IHT payable?

Answer 13

His Majesty’s Custom and Revenue (HMRC).

Question 14

What is CGT?

Answer 14

A tax on the increase of property value following a sale of disposal.

Question 15

What are the CGT rates?

Answer 15

As Roxburghe are a higher rate taxpayer, the rates would be as follows:

Resi: 28%
Other: 20%

Question 16

How is the sale of a farmhouse handled?

Answer 16

Agricultural value is taken into account (MV less 30% would be a good indicator).

Question 17

What CGT relief are you aware of?

Answer 17

Rollover relief.

Question 18

OK, what is rollover relief?

Answer 18

when the gain, or all of the proceeds of the sale of a capital asset are injected into a trading asset.

Question 19

Is there a time frame on rollover?

Answer 19

Yes, the gain must be ‘rolled over’ four years from the end of the tax year in which the asset was sold.

Question 20

What is income tax (IT)?

Answer 20

A tax on taxable income.

Question 21

What IT was payable upon the disposal of the cattle at Rawburn?

Answer 21

47%

Question 22

What is Herd Basis?

Answer 22

A tax relief for a ‘herd’ of agricultural animals.

Question 23

What are the advantages of Herd Basis?

Answer 23

• If the book value and sale value of an animal fluxuates, income tax is not payable.
• When all or a substantial amount (over 20%) of a herd is sold without replacement, no tax will be payable on the difference between sale and book value.
• Herd basis is ‘unelectable’.

Question 24

When do you apply for herd basis?

Answer 24

An election would be made no later than 5 years from when the ‘herd’ was first compiled.

Question 26

What is LBTT?

Answer 26

A charge on land transactions, payable by the purchaser.

Question 27

What are the LBTT Rates

Answer 27

They differ between residential, and commercial. As follows:

Resi
Up to £145,000: 0%
£145,000 - £250,000: 2%
£250,000 - £325,000: 5%
£325,000 - £750,000: 10%
Above £750,000: 12%

Question 28

How is commercial woodland handled from a tax stance?

Answer 28

Exempt in most cases.