Varying changes have been recommended (see our posts here and here), however, we think that changes that follow the recommendations made by the Office for Tax Simplification (OTS) will be more likely.
One of the observations made by the OTS in their report in inheritance tax, was comments around the qualification of AIM listed shares (and similar investments) for 100% IHT business property relief (BPR).
The comments made by the OTS were around the qualification of such investments for 100% BPR, commenting that the qualification was inconsistent with the spirit/purpose of BPR – this being to prevent family businesses being impacted by inheritance tax liabilities.
We feel that there is a significant risk that BPR may be amended to only apply to shareholdings in family businesses (probably a test similar to the ‘personal company’ test for capital gains business asset disposal relief) from as early as the next Budget (which we understand will take place in March).
Individuals holding shares that are AIM listed or in a marketed product who are relying on the availability of BPR should consider planning to attempt to ‘bank’ the relief.
We also feel that there are likely changes to be made to IHT agricultural property relief (APR). Currently APR applies to land occupied by the owner for the purposes of agriculture, and occupied by another for the purposes of agriculture (albeit there are different required ownership periods). We feel that the availability of APR in the latter circumstance (i.e. where it is not owner occupied) is likely to be withdrawn.
For anybody relying on APR where they do not occupy the land for the purposes of agriculture, we suggest they consider their position and consider planning to mitigate the impact of such a change.
We are currently proactively advising clients as to how to manage such tax changes, where the rumoured changes would have a significant impact. Please do not hesitate to contact us where you (or your clients) are concerned and require advice.