Although death is inevitable, inheritance tax, that ghoulish, macabre tax which counts days of survival and looks at a person’s whole life and assets at the point of death, is by no means something that one needs to view in the same fatalistic manner.
Inheritance tax is avoidable, and this month’s article is all about what can be a very dramatic inheritance tax mitigation strategy indeed.
Although the property tide is receding a little down the beach at the moment, an enormous amount of potential rich pickings for the government, in the form of inheritance tax, is derived from the value of people’s property portfolios. Property being a commodity with a strictly limited supply, and the population of these islands steadily growing, property is always going to be a very valuable asset, and increases in value over future years, on the basis of past experience, are almost guaranteed.
So, for a long time, those who wish to get significantly rich have chosen the property option as a method of doing so.
But there are two ways of dealing with property: you can either slowly and surely build up a portfolio of investment properties, whose main purpose is to provide you with a rental income, or you can buy, develop, and sell on an active basis.
A Crucial Distinction
The distinction between these two ways of buying, owning and selling property is absolutely crucial for inheritance tax. Whereas holding property for rent means that the value of the property is fully taxable in the owner’s estate, the conduct of a property development business, in sharp contrast, makes the value eligible for 100% business property relief – that is, the property value isn’t taxed at all."
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