Part 2/2. Investment and IHT newsletter for Financial Advisers | September 2008 Click to go to: Part 1/2

"Bet on the Tory’s £1m IHT limit at your peril."

Stuart Howard, Managing Director of Fareham-based IFA Cassidy Coutts Donald, looks for an all-weather IHT solution.

Stuard Howard Photo left: Stuart Howard, Managing Director of Fareham-based IFA, Cassidy Coutts Donald.

The Conservative party are in clover. With GB looking sadder day by day (that's both Gordon Brown and Great Britain) the Tories are a good bet, at the moment, to win the next election. But that's likely to be 2010 - a dangerously long time to hold a 'polling majority'.

One area that the Tories have indicated they plan to change is Inheritance Tax (IHT). The main area of change is the idea of increasing the Nil Rate Band (NRB) from £312,000 to £1million per person. In itself this would be an incredible development. Such a change in, say, income tax would be like increasing the personal allowance from £6,035 to £19,342.

So what chance they would make this amazing IHT change, assuming they get in? Here’s what’s happened so far:

  • Last October, the Tories pledged to raise the NRB to £1million per person.
  • They have recently been compromised into confirming that their announced £1m NRB will be transferable. It has been "confirmed" by Theresa May, shadow leader, that because the NRB limit can be transferred, in effect the NRB per couple would be £2 million.
  • But in the last couple of weeks George Osborne, shadow chancellor, has been complaining that Labour will leave the economy and government finances in such a mess they are not sure they can quickly deliver any tax reforms which reduce the tax take.
  • The cost is estimated at £2bn per annum. This would be a big hole in government finances which would be extremely difficult to fill.
  • They have announced that they will raise extra revenue by taxing non-doms £25,000 per annum. But when Labour introduced a £30,000 tax for non-doms who have been here for more than seven years, it created an ongoing furore. So any further moves are going to be very difficult and counter-productive in selling London as the financial and business capital of the world.
  • There is a significant groundswell of feeling, demonstrated in regular debates in the House of Lords and elsewhere, that IHT at a reasonable level is a good thing in addressing major inequalities within society. The fact that 19 members of the shadow cabinet are (allegedly) millionaires implies a great deal of self interest.

In any case let's not forget that the Tories are in opposition and we all know that frequently new governments fail to deliver on manifesto promises just because they realise they cannot practically do so.

It is interesting that Osborne has not been drawn on the timing of such a move. Bearing in mind that he has been compromised into agreeing to retain transferability it is probable that the Tories will initially increase the individual NRB to £0.5m so that there is a joint allowance of £1m.

What should taxpayers do now?
It is far too risky for people to just assume that IHT will go away. It and its predecessors have been with us for 100 years. Investors need to know that, whatever happens, their estate, including their investments, is protected. What's required isn't a heads or tails choice but a heads and tails opportunity so that the investor is protected whether the NRB goes to £1million or broadly stays where it is.

There aren't many ways of achieving this but it can be achieved by utilising WAY's market leading fund and trust structures. "WAY has always been at the forefront of IHT mitigation and their trust structures are both extremely robust and very flexible", said Stuart Howard of Fareham-based IFA Cassidy Coutts Donald. "The ideal is to have a trust structure that both shields the investor from IHT but still gives the settlor the control to deal with life's twists and turns. Only WAY's structures provide these very important elements for both capital and income surplus."

"And so, in this uncertain situation when we don’t know if the NRB is moving to £500,000, £1million or £2million, investors need to be certain that whatever happens, they are in control. WAY delivers that certainty", Howard said.

How to contact us
If you wish to talk to someone about the issues raised in this e-newsletter or about any of WAY's products, please feel free to call either your local Regional Sales Manager or Tony Lyons, IFA Support Manager, head office telephone number: 01202 890895. Or you can use the website: Contact Form to get in touch. We look forward to hearing from you.

- Ends -

Additional link - the WAY suite of trust structures:

Click here to access the: WAY suite of trust structures

Newsletter: September 2008.

Note: This newsletter commentary has been prepared for Financial Intermediary Clients and Professional Associates of WAY Investment Services Ltd and is not intended for and must not be distributed to Private Investors. This information is supplied to you in confidence and you may not pass it on to any other party without prior written consent. Past performance is not necessarily a guide to future returns and changes in rates of exchange between currencies may cause the value of investments to rise or fall. No representation or warranty is given (express or implied) as to the accuracy, completeness or correctness of the information nor the opinions, interpretations and conclusions contained in this commentary. The commentary does not constitute investment advice or a recommendation to purchase or sell any security. Neither the author nor WAY Investment Services Ltd accept any liability whatsoever for any loss or damage arising in any way from any use of or reliance placed on the commentary. WAY Investment Services Ltd is an Appointed Representative of WAY Fund Managers Ltd which is authorised and regulated by the Financial Services Authority.

Newsletter: September 2008.