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Swings and roundabouts

20 Nov 2018

Earlier this year, I reported on the case of Vigne v HMRC. The case involved a claim for Business Property Relief (“BPR”) by Mrs Vigne’s executors on a livery.

By way of recap, BPR is an inheritance tax relief available at a rate of up to 100% on a trading business. BPR is not available on investment businesses. Traditional liveries do not usually qualify for BPR because they are regarded as an investment in property in return for a rental income. The executors of Mrs Vigne’s estate argued that her livery was more than an investment business because of the additional services she provided. Ruling in favor of the estate, the First Tier Tribunal found Mrs Vigne’s livery was more than an investment because of the additional services she provided. Mrs Vigne’s livery was therefore eligible for BPR.

HMRC have now appealed this case to the Upper Tribunal and it is good news that the original decision has been upheld. However, the Upper Tribunal found “there is no clear bright line between businesses which qualify for the relief and those which do not”. Each case will therefore turn on its own particular facts. Without clear guidance there remains no guarantee that BPR will be available on liveries regardless of the services provided and business owners should be considering this as part of their wider succession planning.

In other news, you may recall last year I warned of a potential increase in the Probate Court fees. These are the fees paid to the Court in order to obtain a Grant of Representation and the current fee for all estates is fixed at £155. The Grant is often needed to administer a deceased person’s assets. Following the General Election, the proposed increase – which saw some estates paying a Court Fee of up to £20,000 – was put on hold. However, a revised version of the increase is now back on the political agenda.

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The new proposals see the cost of obtaining a Grant of Representation increase depending on the value of the deceased person’s estate. Whilst an estate valued under £50,000 will not have to pay a fee at all, an estate worth more will see an increase in the fee. The maximum fee, for an estate worth over £2m, is £6,000. The increased fee is a concern for bereaved families particularly where access to cash sums is not readily available. For instance, where a farming estate is valued at over £2m due to land, there may not be large cash sums immediately available to pay the Court Fee. The proposals are yet to come into force but the advice to those dealing with the administration of an estate, would be to apply for the Grant as soon as possible.

As the law continues to develop and change, it is important to keep up to date on how these matters may affect you. At Hay & Kilner our team of expert advisers in the firm’s Private Client Department can assist Executors and Administrators on all aspects of estate administration and advise individuals about Wills, Lasting Powers of Attorney, Inheritance Tax and Succession Planning.

For more information on any of the above, or how we can help you, please contact Alison Hall, or call 0191 232 8345.