One thing that the Covid-19 pandemic has taught us is the need to keep things in perspective and concentrate on the important things in life. This has meant that planning ahead to protect your family and your finances is increasingly important. To do this you will need to keep updated on tax changes including the recent announcement relating to Capital Gains Tax (CGT).
This is not related to tax, but involves asking what would happen to your family or your business finances if the worst happened?
This has been brought home to us all during the pandemic, and involves ill-health as well as death. We have seen a greater willingness for farming families to engage in these difficult discussions in recent weeks. In some cases merely getting an issue out in the open makes everyone feel better, while in others it may be that an insurance or other investment solution is appropriate.
Again the most important point is to take the first step and discuss the issues within the family. In too many cases the parties think they know what other family members want in the future, but have not openly talked about them.
We have discussed on this page in recent months the likely changes to Inheritance Tax, and we cover the review into CGT below. None us know what changes are going to take place, but it is safe to assume that rates of tax are not going to fall and reliefs are not going to be made more generous.
Thus there is a case for undertaking succession planning sooner rather than later. All businesses are different, so it is not possible to set out a blueprint, and getting the next generation involved in decision making is as important as who owns the assets.
The final point in this section is more mundane, but still important. Are there any day-to-day tasks that only one family member knows how to undertake? If so, these need to be documented or ideally other members made familiar with procedures, just in case the worst happens.
The Chancellor of the Exchequer will be looking for ways to raise extra revenue to reduce his budget deficit. On 14 July it was announced that the Office of Tax Simplification (OTS) has been asked to carry out a review into CGT. The OTS is an independent body and the Chancellor will not necessarily implement all the recommendations. However, the breadth of the remit given to the OTS suggests that HMRC are open to radical changes.
Amongst the instructions given to the OTS are:
It has to be said that the existing system is extremely complicated with a multitude of different reliefs and exemptions so some simplification would be welcome.
So what could the Chancellor do?
We will have to wait until later in the year to see what the OTS actually propose.