Gifting

Whilst the lock-down and reduction in business activity caused by the Coronavirus outbreak has had a negative effect of the value of many assets, such as property, shareholdings and other assets, this does give rise to a potential opportunity to gift these assets to loved ones at a far lower market value than previously. This could benefit you in two ways – 
 
1.    Starting the tax-free gift exemption clock earlier than planned. Provided you survive seven years from the date of making a gift then that gift falls outside of your estate for Inheritance Tax (“IHT”) purposes, so passed out of your estate completely free of IHT. 

If the gift is made less than seven years before death, there could still be a saving of IHT as gifts made more than three years prior to death may benefit from tapering, and in addition the value may increase giving rise to a greater liability to IHT if the asset is retained until death. 
 
2.    By gifting an asset now this is likely to give rise to a charge to Capital Gains Tax (“CGT”)  but the gain may be lower now than in the future.  Although there is no CGT on assets passing on death, the rate of CGT is currently 20% for most assets, and 28% for residential property whereas IHT is at a flat rate of 40%.
 
If you would like to explore the above points in greater detail, please get in touch with your contact at Sopher + Co and they will be very happy to discuss any planning options with you. Get in touch.