The recent increase in the rates of Capital Taxes to 25% necessitates careful wealth & succession planning. Given that the tax rates in this area are likely to increase further coupled with a dramatic fall in the tax free Capital Acquisitions Tax thresholds the need for estate planning is now more critical than ever.
The challenges faced when assessing the wealth of an individual is two fold. Firstly, the need to reduce the annual taxes payable by the individual and secondly, the capital taxes payable where the individual seeks to transfer those assets to their successor or successors.
The Second challenge listed above is one that FDC Tax Department have been hugely successful in and have developed its own style of Tax Planning. This is discussed below under the heading of Estate Planning. The first challenge is more difficult because each years Finance Act refines the tax system. Taking advantage of tax opportunities to effect an annual tax reduction requires continuous examination.
Annual Tax Reduction
The Government use the tax system to encourage development/investment in particular areas. They do this by giving tax breaks for specific investments, e.g. Nursing Homes, Childcare Facilities, previously Section 23 type properties and student accommodation etc.
The opportunity thus exists to structure the affairs of the taxpayer in order to take advantage of those relief’s. In some cases, a small investment by the taxpayer can result in the availability of significant tax relief’s to be offset against other income.
It is also important to examine the ownership structure of all assets. Perhaps an advantage could be obtained by possessing some asset as an individual and some portion in a Company format.
In relation to development of property, the structure plays a significant part. Like any expense, tax is a cost. By reducing that tax cost, ones is increasing the net profit of the developer.