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A recent case heard in the Court of Appeal illustrates the beneficial Inheritance Tax (IHT) treatment of certain classes of assets and the advisability of taking advice on IHT planning as early as possible.
Christopher Swain was a 61-year-old entrepreneur who suffered from ill health, including heart problems and diabetes. He spent most of his time living in Thailand. In 2006, he decided to sell his shares in his company, Swain’s International plc, in a management buyout.
The buyout was successfully completed on 31 January 2007, and in February Mr Swain went into hospital for a planned operation. Unfortunately, he died during the procedure, despite the alleged low risk attached to the operation.
As the sale of the shares was completed prior to his death, Capital Gains Tax (CGT) was due on the increase in their value during his ownership. In addition, the proceeds formed part of his estate and were thus liable to IHT at 40 per cent. By comparison, if Mr Swain had retained the shares at the time of his death, the increase in value during his ownership would not have been subject to CGT. Furthermore, the IHT payable on his estate would have been reduced significantly due to the availability of Business Property Relief in respect of the shares.
Mr Swain’s daughters claimed that the family’s solicitors should have advised their father to delay the sale of the shares until after the planned operation, but the Court of Appeal rejected their claim.