Although it may not be high on your list of priorities, given the current circumstances, there are still opportunities for tax planning to be had during the Coronavirus outbreak.
At times like this, people can start thinking about reorganising assets and investments, to ensure that everything is structured in the most tax-efficient way.
However, reorganisation does not always come without a tax cost; any gains made from disposals or deemed disposals can be subject to tax charges, whether Capital Gains Tax (CGT), Inheritance Tax (IHT), Stamp Duty Land Tax (SDLT) or Income Tax.
Many people do not appreciate that, just because no money changes hands, tax may well be at stake.
The resulting tax liabilities can see people hesitant to dispose of or transfer certain assets. However, crisis’ like the one we are experiencing can present the perfect opportunity to do so.
Take, for instance, giving away assets or making a transfer to a trust. Unless the asset is cash; when you undertake either of these activities, you are deemed to be disposing of the asset at market value.
Considering the situation that we find ourselves in at present, you may find that classes of assets are sitting at a lower than usual market value.
This can be useful, since the value used for the purposes of calculating tax liabilities is the value on the date of the gift.
Subsequently, a lower market value may mean a reduced or eliminated gain and therefore a reduced or eliminated tax liability, where there previously might have been a more significant gain and resulting charge.
As an example you might have been looking to give away a property to your children standing at a gain. With values having fallen, you and your spouse who each have a CGT exemption of just over £12,000 may find this eliminates most of the tax payable.
Taxation Partner, Barry Jefferd, commented: “Given the current circumstances, it is very likely that some asset values will be a lot lower than usual and so gifting assets, transferring assets or creating trusts could suddenly be a lot more affordable for those considering a ‘reorganisation’ of sorts.”
“Whilst tax planning might not be high on your list of priorities, bearing in mind the day-to-day challenges we are all facing, in a post COVID-19 world you might be glad that you took the time to consider the opportunities available to you.”
How can George Hay help?
At all times, not just now, planning is important if you are to ensure that your affairs are handled in a tax-efficient manner.
Bear in mind that your circumstances are likely to be very different to the next person, so it is essential that you seek professional advice at the earliest opportunity.
Discussing your upcoming plans, for the next 12 months and beyond, with a tax adviser or accountant could help you to significantly reduce your liabilities.
If you’d like to talk to one of our team about effective tax planning, no matter what stage your business is at, please contact us today at one of our offices in Biggleswade, Huntingdon or Letchworth, or fill in one of our online enquiry forms.