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Wealth Management & Protection
Asset Protection is essential for protecting and preserving company and family assets from third party claims, divorce, bankruptcy, spendthrift spouses, and youthful improvidence.
Taking the most appropriate action for the protection of your own personal assets is a very complex undertaking, requiring specialist taxation and legal assistance. Asset protection must be commercially driven and cannot be used to avoid paying creditors.
Whilst asset protection is fundamental in considering estate planning, the principle can be extended to other circumstances as well. Two common areas in brief:
PROTECTING AN INDIVIDUAL’S ASSETS
Generally, one of the most efficient ways you can protect assets is by transferring them into a relevant and properly constituted trust. The asset should then be protected against the bankruptcy or divorce of the beneficiaries.
Pitfalls
Firstly, setting up a trust for asset protection will in itself not afford any protection under insolvency or matrimonial laws for beneficiaries if the wrong type of trust is used. We have seen many trusts set up for this purpose that have failed. If one tries to rely on an improperly constituted trust for asset protection the courts may look through it and seek to set it aside.
Secondly, a point which regularly tends to be overlooked (particularly regarding property) on transfer is the mortgage against the property. If the mortgage is more than the original “base” cost of the property (perhaps due to remortgaging) then Capital Gains Tax may be liable if the mortgage is transferred into the trust. Furthermore, such transfer may potentially trigger a Stamp Duty Land Tax charge.
Many think that an outright gift of assets directly to children, siblings, etc will automatically afford protection against divorce or bankruptcy. This may not be the case and is a potentially dangerous presumption to rely on, specialist professional advice should be sought to achieve the desired results. Also such transfers tend to trigger a Capital Gains Tax charge under the deemed disposal rules and again this is often overlooked with significant tax consequences.
Company Property
Businesses may wish to protect vulnerable property and assets against commercial and business risks. Broadly speaking, one way this could be achieved would be by creating a group of companies and transferring the property into this group. The effect of this would be to “ring-fence” the vulnerable asset against any claims of the individual trade in the group.
Pitfalls
It is essential that any asset transfers is done correctly to avoid the property being “linked” to the original business, as this will afford no protection. Of equal importance is that any debts between the group companies would need to be dealt with correctly to provide any real protection.
In all cases there needs to be a legitimate business, commercial or investment driver for the transaction. Furthermore, it is crucial that any such restructuring does not fall foul of insolvency legislation, namely the defrauding of creditors.
Asset protection is an invaluable planning tool which can be used to protect, preserve and devolve family wealth in the right circumstances.
For further information on how you can effectively safeguard you assets and wealth please contact us.
Latest news & blogs…
Mini-Budget scrapped by new Chancellor
THE NEW CHANCELLOR has today scrapped most of the mini-Budget announcements made by his short lived predecessor. What, if any, of the announcements made by Kwasi Kwarteng survived the latest round of U-turns?
In today’s brief Shipleys Tax blog, we look at the latest round of fiscal policy announcements, which may or may not stick around.
What’s left from the mini-Budget 2022
The Chancellor, Jeremy Hunt, announced today that the cutting of the basic rate of income tax (from 20% to 19%) would be postponed indefinitely – at least until “economic conditions allow a reduction”.
This had been rumoured toward the end of last week, but that wasn’t the end of the U-turns. The planned cutting of dividend tax (which was increased in line with National Insurance) has also been scrapped, as has the reversal of the controversial off-payroll working/IR35 rules. The cap on energy bills that was set to last for two years will now, however, be reassessed in April.
What has remained?
The only major measures that remain from the mini-Budget are the changes to National Insurance (1.25% cut retained), increase in the stamp duty land tax allowance, and the permanent increase of the annual investment allowance to £1 million.
More to follow.
Further embarassing U-turns on the Mini-budget 2022
THE EMBARASSING farce continues at Westminster with more twist and turns than reality TV. The PM Liz Truss has today overseen more U-turns to her now defunct flagship fiscal policy – the Mini-BUdget 2022.
Here at Shipleys Tax we look at the new merry-go-round of announcements made today. Quite how long these policies will last is anyone’s guess.
NEW Summary Budget measures – 14 October 2022
- Income tax
45% Additional rate abolished (40% top rate now)SCRAPPED – 45% top tax rate to be reinstated- Basic rate cut to 19% (from 20%) – RETAINED FOR NOW
- NIC – April 2022 increase in NIC reversed from 6 November and Health & Social Care Levy scrapped: RETAINED
Corporation tax to remain at 19% – planned 2023 increase to 25% cancelledSCRAPPED – Rise to 25% reinstated- Off payroll working/IR35 – previous legislative changes to be repealed from April 2023 – RETAINED
- Introduction of VAT-free shopping for overseas visitors – RETAINED
- New “Investment Zones” with enhanced tax reliefs and relaxed planning frameworks – RETAINED
- Removal of cap on bankers’ bonuses – – RETAINED
- SEIS and CSOP limits to be increased. EIS and VCT reliefs will be extended beyond 2025 – RETAINED
- Annual Investment Allowance to stay at £1m for capital allowances – RETAINED
- No stamp duty on first £250,000, for first time buyers that rises to £425,000 – comes into operation today- RETAINED
All policies subject to change. Further detail to follow.
U-turn by Chancellor on 45p Tax Rate
AFTER A DRAMATIC U-turn the Chancellor has decided to scrap the 45% tax rate. The move was widely criticised amid a cost-of-living and energy crisis and has gathered hugely negative momentum over the course of a few days.
At Shipleys Tax we have the latest on the mini-budget merry go round.
Turning point…
The Chancellor has confirmed that the tax cut will not go ahead, due to the distractions this policy has caused, reversing the announcement only made a few days ago to a lot of fanfare.
Now, from 6 April 2023 those earning over £150,000 will continue to pay the top rate of 45% income tax. However, due to other planned tax cuts, those with income over £150,000 will pay just 38.1% income tax on dividends from 6 April 2023 (currently 39.35%), meaning there will still be an incentive (albeit a smaller one) to delay dividends until on or after 6 April 2023.
The Chancellor is set to announce his medium-term fiscal plan on 23 November.
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