I have a client who is looking to minimise iht and set his business up efficiently now. I am giving the client an idea, he is seeking advice from an expert iht but I would like help understanding the risks for myself.
he has a propert portfolio in his own name with a value of £1m, purchase price of £500k. It makes about £80k profit a year. (He and wife own a £600k home too so no iht allowances are left)
he is married with children, are the assumptions in options below accurate and are there any better options?
1. Leave business as is, pay iht at 40% on £1m.
2. Leave as is, remortgage £250k equity release and gift to kids. If he survives 7 years iht paid on £750k at 40%.
3. Sell property business to a new company owned equally by family members. DLA creates with £1m balance. Remortgage to pay off £250k of dla, then gift to kids. Then pay CT each year on profit and repay dla each year with profits. If he survives long enough to pay off DLA IHT will be due on his share of the company (ie- 1/5 of business. CGT will be payable at sale to company of 28% of the gain £500k plus stamp duty.
Is there a way to reduce his shareholding in the company once the DLA is repaid to reduce iht that will be payable on his shares, maybe other shareholders loan the company £10k each then capitalise it and dilute his shareholding?
I hope these options make sense but would be great to get opinions, if I’m completely wrong be gentle please!