Is there any reason why in principle assets cannot be redirected to a company via a Deed of Variation? Does it matter whether or not the company existed at the date of the tesator’s death? This could save SDLT in the case of land as an exemption is available under Schedule 3 FA 2003 (broadly if the DoV is effective for CGT/IHT) which trumps the market value rule under s53 FA 2003.
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I recall looking at that and couldn't see any reason why the SDLT relief would not apply, but you need to worry about corporation tax on the gift. A post death trust is fine per the comments in the link below:
http://trustsdiscussionforum.co.uk/t/deed-of-variation-into-a-discretion...
What’s important is that the trust exists before the execution of the DoV, so I think the company would not need to exist at the death date.
So maybe you can use an offshore tax haven company? I could be talking rubbish though if anyone wants to correct me.
So maybe you can use an offshore tax haven company? I could be talking rubbish though if anyone wants to correct me.
What is the purpose of this transfer of an asset to a person abroad, Justin?
If the beneficiary is going to be the owner of the company, and the asset is going to produce income, then that income will remain taxable on the beneficiary by virtue of ITTOIA 2005, s 624.
Yes; I am well aware of TAA/settlements legislation and I did not say that it avoided that did I? The question is re SDLT and (implicitly) any potential (significant) downside and the aforementioned anti-avoidance provisions are not necessarily a downside are they all else being equal re any SDLT saving if that's what's desired? Furthermore, these could be non-UK residents etc. (I assume you've been away as you've not goaded me for a while!)
The DoV is only retrospective for CGT/IHT, so you should assume settlements legislation applies (assuming usual conditions are met) unless some clever person can explain why it doesn't apply.
I've never seen anybody try this. I'd have expected HMRC to pick up on this pre-merger, but nowadays there's a very good chance that it will only ever be looked at by clueless fuchwits. That doesn't make it god advice IMO though.
I'm happy that a new trust can be created through a DoV but a company must be incorporated first which involves an additional step. This is a concern (as is s624 re my comments to Portia Nina Levin).
I'd like to see your point here answered. It's possible to pass assets to as yet unborn grandchildren, but only via a trust. Could it be that an 'unborn' company could inherit only via a similar mechanism (and not directly, as Justin suggests)?
For completeness, although the associated operations rules in TAA may apply to the DoV, since the transferor is dead presumably only the beneficiary charge can apply (if surviving spouse excluded). See:
https://books.google.co.uk/books?id=Kw37z_mm7A8C&pg=PA478&lpg=PA478&dq=a...
[Edit] The above point is only correct without a DoV i.e. under an original unamended will (since per my above comment it's not retrospective re IT).
For income tax purposes, the transferor is the beneficiary. The DoV being treated as the deceased's disposition is a fiction that only applies for CGT and IHT purposes, and causes the SDLT exemption to apply.
A DoV is a settlement by the person who would have received the asset but hasn't because they have signed up to the DoV.
Actually, the Levy case in the link below suggests there is no bounty and the settlements legislation should not be a problem (if accounted for by the company as a shareholder capital contribution say rather than a gift - it cannot issue shares etc. per s142(3) IHTA 1984 and https://www.gov.uk/hmrc-internal-manuals/inheritance-tax-manual/ihtm35100 and of course para 4(2)(b) Sch 3 FA 2003).
http://www.uniset.ca/other/cs4/56TC68.html
Example 5 in the link below seems consistent with that:
https://www.gov.uk/hmrc-internal-manuals/inheritance-tax-manual/ihtm14334
The lack of GWR in HMRC's above example suggest there's no bounty i.e. it supports Levy. Clearly there needs to be an equality of treatment re the variation and corresponding increase in share value per Levy (which is also the case re forgone interest, so I see no reason why that's not supportive as share price goes up to compensate and eliminate bounty in both cases).
Or they're just suggesting that there's no reservation of benefit...
They're examples demonstrating exclusion of the donor.
But clearly the shareholder benefits from the shares, so I don't think so. When you start being insulting it can be amusing, but it rather suggests that I'm right and you're wrong if insults is all you have to argue with.
Yes, I agree and reflecting on the link below the IHTM is supportive after all, as it considers what is a gift rather than what is a ToV:
https://www.gov.uk/hmrc-internal-manuals/inheritance-tax-manual/ihtm14315
Also, issuing shares in return would not be bounteous, so I see no reason why a capital contribution is different, since in both cases the economic effect for the shareholder is the same i.e. the value of shares increases correspondingly.
There is a gratuitous benefit being conferred on the company. There probably isn't a transfer of value in the example though because the transferor's estate is not diminished.
OK, the IHTM is not conclusive re the no bounty point I agree (but it is also not unhelpful), but the Levy case is still very helpful there (and I see no reason why it makes a difference that you get shares issued as consideration (definitely no bounty) rather than making a capital contribution as the economic effect re your share value is the same).
On any given day, there's a strong possibility that Justin's talking complete b0110x. Particularly days with the letter d in them.