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Budget stuff  •  Business Services  •  Business Tax  •  eis  •  IHT  •  Personal tax  •  Probate and Inheritance Tax  •  Share Schemes

Will the Chancellor touch inheritance tax in the 2014 Budget?

By Lesley Stalker on 10 March 2014

We’re thinking ahead to what’s in store for us on March 19th when George Osborne delivers his Budget speech, and as always it is a concern that inheritance tax (IHT) is an area that will come under scrutiny. It is some consolation that the Government has its sights set on winning the election which is looming in 2015 and so is unlikely to do anything too drastic. But it is necessary for Treasury revenues to continue to be increased, and IHT is an obvious target tax since it has not been tinkered with for many years. It also has the attraction, for publicity purposes, of not affecting a large portion of the population and not being the primary focus of most of those it does affect, because it is mainly a liability that arises after death.

At the time of the last election, there was talk of increasing the IHT threshold to £1m, but these plans were quashed when the Coalition was formed. It is unlikely George Osborne will reintroduce this policy as it will be perceived as assisting only the wealthy. Instead, additional revenue could be raised by reducing certain reliefs, such as Business Property Relief (BPR) which will only impact the business community.

BPR currently exempts certain business assets from IHT entirely and exempts a percentage of other business assets. For instance it is possible to transfer shares in an unquoted company or an interest in a business completely free of IHT. When certain other business assets are transferred, the IHT liability which would otherwise be payable is reduced by 50%. These reliefs could be reduced in order to generate additional revenues without affecting the marginal voting public the Government is so keen to keep on side.

What else could be in-store for taxpayers in the 2014 Budget? Rewarding workers is high on the priority list for the Government and they have recently been very vocal about their support for John Lewis style businesses. In recent Budgets we have seen improvements to the Enterprise Management Incentive (EMI) scheme, and the introduction of a new employee share scheme, so whilst we are likely to hear reminders of these incentives, it is unlikely that we will see additional employee share owning initiatives.

There are many calls on the Government to improve finance options for small and medium sized businesses, and this is of course important to sustain growth. There could therefore be an increase to the upper limit for Enterprise Investment Scheme (EIS) investment and an extension to the Seed EIS scheme for smaller companies. This would enable both small and medium sized companies to attract more business angel funding by offering more attractive investment terms. As bank funding remains difficult to secure, this could help to further invigorate the recovery and encourage more companies to pursue expansion plans.

Lastly, with red tape remaining a big problem, we might see the Government begin what will no doubt be a long path to introducing the long rumoured ‘single tax’; bringing together NIC and PAYE taxes. Some MPs are already campaigning for a new ‘earnings tax’ to be introduced and perhaps the Budget will include a timetable of when to expect the change. As RTI is now fully operational this could be seen as the next step.

We will be reporting via Twitter on the Budget announcements as they happen and we will send out our usual interpretation of what the changes will actually mean in our Livewire issue for the month.

To discuss tax planning before April 5th 2014, please contact Lesley Stalker by emailing las@rjp.co.uk.

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We’re thinking ahead to what’s in store for us on March 19th when George Osborne delivers his Budget speech, and as always it is a concern that inheritance tax (IHT) is an area that will come under scrutiny. It is some consolation that the Government has its sights set on winning the election which is looming in 2015 and so is unlikely to do anything too drastic. But it is necessary for Treasury revenues to continue to be increased, and IHT is an obvious target tax since it has not been tinkered with for many years. It also has the attraction, for publicity purposes, of not affecting a large portion of the population and not being the primary focus of most of those it does affect, because it is mainly a liability that arises after death.

At the time of the last election, there was talk of increasing the IHT threshold to £1m, but these plans were quashed when the Coalition was formed. It is unlikely George Osborne will reintroduce this policy as it will be perceived as assisting only the wealthy. Instead, additional revenue could be raised by reducing certain reliefs, such as Business Property Relief (BPR) which will only impact the business community.

BPR currently exempts certain business assets from IHT entirely and exempts a percentage of other business assets. For instance it is possible to transfer shares in an unquoted company or an interest in a business completely free of IHT. When certain other business assets are transferred, the IHT liability which would otherwise be payable is reduced by 50%. These reliefs could be reduced in order to generate additional revenues without affecting the marginal voting public the Government is so keen to keep on side.

What else could be in-store for taxpayers in the 2014 Budget? Rewarding workers is high on the priority list for the Government and they have recently been very vocal about their support for John Lewis style businesses. In recent Budgets we have seen improvements to the Enterprise Management Incentive (EMI) scheme, and the introduction of a new employee share scheme, so whilst we are likely to hear reminders of these incentives, it is unlikely that we will see additional employee share owning initiatives.

There are many calls on the Government to improve finance options for small and medium sized businesses, and this is of course important to sustain growth. There could therefore be an increase to the upper limit for Enterprise Investment Scheme (EIS) investment and an extension to the Seed EIS scheme for smaller companies. This would enable both small and medium sized companies to attract more business angel funding by offering more attractive investment terms. As bank funding remains difficult to secure, this could help to further invigorate the recovery and encourage more companies to pursue expansion plans.

Lastly, with red tape remaining a big problem, we might see the Government begin what will no doubt be a long path to introducing the long rumoured ‘single tax’; bringing together NIC and PAYE taxes. Some MPs are already campaigning for a new ‘earnings tax’ to be introduced and perhaps the Budget will include a timetable of when to expect the change. As RTI is now fully operational this could be seen as the next step.

We will be reporting via Twitter on the Budget announcements as they happen and we will send out our usual interpretation of what the changes will actually mean in our Livewire issue for the month.

To discuss tax planning before April 5th 2014, please contact Lesley Stalker by emailing las@rjp.co.uk.