Farmers worried about IHT should incorporate
Sat 1:52 am +00:00, 2 Nov 2024The quickest way to negotiate IHT for farms would be to incorporate and become limited companies, with the farmer and his family as shareholders. The value of minority shareholdings in close companies (not listed on a stock market) are almost zero. The controlling interest is usually 75% of the shares in a business, which might have value at about three times annual profits – probably way lower than the value of the assets employed in the business. I am no expert but if I was a farmer this is the way I’d be looking and researching right now.
Children and descendants can receive dividends enabling low tax bands of income tax to be utilised. Money owed to directors by companies are debts and therefore valued at zero for IHT purposes, as they cannot be guaranteed that the debts will be paid. Debt is short for ‘dehabet’ in Latin, meaning you do not own the indebted asset or the debt in reality, even if it appears as yours in an account.
It may not be possible to incorporate the home(s) situated on the land, but the farm could effectively disappear as a personal asset, as could cash reserves. If the home is in effect the office, then maybe the home could be incorporated. I am not an expert as I say, just someone who thinks outside the box. Look into the possibility is all I am saying.
The admin burden woukd be higher but with information systems available, might not be too bad. The government could in fact find farms pay less and less tax this way, not more. The old law of unintended consequences could apply.
