New anti- avoidance rules take effect after the Royal Assent in July.
They make certain loans non-deductible for Inheritance Tax ( IHT ) purposes. Those affected will include anyone who borrowed money to buy an asset eligible for Business Property Relief ( BPR) or Agricultural Property Relief ( APR), but secured the loan against a non-chargeable asset, such as their home. The purpose was to turn a chargeable asset into one of reduced/no value, whilst introducing an asset which, with the benefit of 100% BPR or APR, escaped IHT. This has been good tax planning for business owners and farmers for many years, but those affected will include those with existing arrangements, not just those trying to make such arrangements in the future.
Similarly any non-UK domiciled person who secured a loan against a UK asset but used the money to buy an (IHT exempt) foreign asset will also lose the benefit of the loan as a deduction for IHT if they make a gift, or die, after the Royal Assent.
Anyone in this position who is considering a substantial lifetime gift of the business (or foreign) asset should consider taking advice well before July.
If you would like further information please contact Carolyn Bagley on 01604 467015 or click here to email Carolyn.