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The Informed Investor
Website: www.ukinformedinvestor.co.uk 
email: info@informedinvestor.co.uk
Welcome to The Informed Investor.1972-2010
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The Informed Investor began publishing from offices at 13 Nottingham Place, London, W1 ( See Picture Left) in 1972. It started as a printed publication for Drummond & Co offering Investments and Insurance. Long before today's regime in regards commissions Drummond & Co pioneered discount  selling of  Linked Insurance and Unit trusts- splitting the commissions with the purchaser. Many in the Industry condemned this and many leasing Insurance Groups refused to take their business. Most of those companies have gone out of business today & Drummond & Co are recognised as the Company that led the way. Today 38 years later Drummond & Co still lead the field in Financial Innovations and have advised both the public and professionals.
As Financial Commentators the Informed Investor have, over the years, Informed Investors about dangerous offers and Financial mis-doings sometimes years before the scandals broke.
This we continue to do through our many websites. In 2009 over 79 million visits were made to our pages and over 40 million so far in 2010.



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NOTICE: In regards to the Direction by The Chancellor of The Exchequer, Hovis, all tax avoidance plans are being operated by an off-shore company and are created in consultation with the clients as one - off plans for that client only. Most of the plans listed below are now defunct but give an idea on the type of plans we have been writing since 1966. Drummond & Co will be pleased to introduce those interested in Tax Mitigation to the off-shore company, who are under no obligation to the Inland revenue.
For the information of the Inland Revenue you can read up on all the plans we utilise by reading the Statutes of England and Wales. They are all in there.

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The Taxless Society's Financial Index. 
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Corporate Future Profits Plan Credit Cards Creditor Negotiations Croxtons Carpet Scheme(NIC) Croxtons Grapevine Scheme(NIC)
Day Trading Debit Cards Debt Problems & Bankruptcy Employee Benefit Trusts  Film Investment
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Replacement birth/death certificates Replacement Pay slips Resell Debit/Cash
Residential Property Investment Telecommunications Cost Reducer

Boxes written in red- details will be sent- please E-Mail to:
Filled pages are not available at present- Details sent on application

Our “A Team” of tax experts believe that the Chancellor is going to close two loopholes in tax law in the mini Budget in November.

These loopholes revolve around:

a) Mitigating tax in trusts with stock pile gains (tax at 64%) often referred to as pre 91 trusts.

b) The use of Second Hand Bonds to mitigate Capital Gains Tax in a company and personal CGT in this tax year.

The minimum gain that our experts will work with is £1m (or two clients with £500,000 each).

The fee is £30,000 upfront (excluding Counsel’s Opinion) with a total fee payable of 25% of the tax saved which is contingent on the strategy working. 

The introducing professional will receive 15% of the total fee for effecting the introduction.


where the chargeable event occurred post August 1999.

A number of Dotcom executives sold shares in the tax year 1999 / 2000 and made a fortune. Most paid tax on this gain. 

Our experts have a strategy for reclaiming any Capital Gains Tax paid on behalf of your clients – minimum £1m.

The fee is 25% of tax reclaimed with you receiving 15% of the total fee. 
For details contact 24 hour Hotline  Tel: +44(0) 845 868 2810
Fax : +44(0) 845 862 1954
or email:



This scheme is for a UK resident taxpayer - company or individual - who has made or will make in the future, a chargeable capital gains of assets in the current accounting period or tax year respectively. The Capital Gains Tax can be substantially reduced or eliminated.

Simply this is done by the person or company buying an asset which loses its value on the day of purchase in favour of an enhanced value in the future.

The instrument may be paid for in cash, an existing share, unit trust or bond portfolio, unlisted securities such as private company shares or other property. The existing assets are “rolled over” into this plan. The discounted rate is accepted by the Revenue.

An Investment portfolio of say £100,000 could drop in value to £6,801. Reducing CGT or maybe even creating a Capital Loss However the client may withdraw an interest free loan facility to ensure that moneys can be made available as and when they are needed. This plan relies on the use of a little known instrument underwritten by a Financial Institution. (Further details available on CAPITAL REDEMPTION PLANS )


This plan uses the system as the Capital Gains Redemption Plan except that its aims are to mitigate Inheritance Tax. Quite simply the same instrument is used. If it is taken out on a Personal basis, the value will drop on purchase and will have a smaller value on the death of the Purchaser. After the death, the beneficiary may borrow against the full value even though the Inheritance Tax is only applicable on the redemption value. (Further details available on CAPITAL REDEMPTION PLANS )



For Professional advisers who advised on our former "Benefits in Kind" ORIENTAL CARPET SCHEME and are in discussion with the authorities in regards to them please read our link page on this DEFENDING THE CARPET SCHEME (Click on blue line)

A Company purchases the same asset as for the Capital Gains Redemption plan (CGRP) for £100,000 as a genuine Capital loss for the Company and then give it to the Employee or Director. They would be giving £6801 not £100,000 to the recipient who would then pay tax & NIC on the £6801.

Presuming the recipient is paying 40% tax if he were to receive £100,000 normally he would pay £40,000 income tax and the Company would pay £10,000 NIC. = Total of £50,000.

If the Company purchased the CGRP for £100,000 and then gave it to the recipient the amount received would only be valued at £6801. Charges would be Income Tax 40% of £6801 ( £2720.40) + Company NIC @ 10% = £680 plus policy charges of 10% = £10,000- Totalling £13,400 a saving of £36,600. The Recipient can then take advantage of the Interest -free loan back on the CGRP

COMPARE THIS TO THE SAVING OF ONLY £10,000 under the old "benefits in kind" schemes and you will understand one of the greater benefits such a plan will give. (See on CAPITAL REDEMPTION PLANS)

BritishEmployee Benefit Trusts
These have developed essentially as a way of motivating employees by providing performance related benefits from a pool of funds made available by the Company for that purpose.
The benefits include:

  • Immediate Corporation Tax savings on the contribution. 
  • No National Insurance charge on the contribution. 
  • No Income Tax assessment on the employees. 
  • Funds held by Non-resident Trustees in a tax exempt fund. 
  • No restrictions on the investments of the fund including loans to the employer and employees. 
  • Free of Inheritance Tax 

  • Fees are dependent on how many personnel are involved.
    Call for Personal attention on this plan.
    If you have a Tapaz ID you can request more information on British Film Investment, by entering your ID and pressing Tapaz.

    If you are earning £1000,000 pa with Bonuses would you rather pay your income tax to the tax man or invest it for your ultimate benefit?

    To do so you should consider utilising the tax benefits of a British Film Investment scheme.

    A partnership is established to include a corporate partner and a managing partner. Individuals who wish to shelter their income tax are invited to join the partnership to acquire and exploit a British made film.

    An individual who makes a loss in a new trade can offset the loss against his taxable income for the current year and also the previous three years.

    Under present legislation the total cost of a new British film can be written off for tax purposes in the year of acquisition.

    The partnership makes a tax loss in its first period of trading which enables the partners to offset the loss against their current year liabilities to reduce these to nil and to claim repayments for past years.

    The partners will subscribe 30% of the cost of the film as partnership capital and borrowings fund the remaining 70%. As such, the cash cost to the individual partner will be half of the tax bill to which it relates.

    If the film is profitable then each individual partner will share in that profit which is taxable.

    As the partnership will also have a performance guarantee amounting to 80% of the cost of the film the individual partner will halve his income tax rate if the film is a total failure.

    The partners are committed to the partnership for 3 years before they may resign. However, they have the opportunity to reduce their involvement by up to 70% by selling their interest to other existing partners.

    Target Clients

    Individuals with significant amounts of taxable income. The amounts will vary according to the cost of the film but the minimum loss available to a partner will be approximately £180,000.


    INTEGRA /MERCURY MANAGEMENT CONSULTANTS LTD are able to assist companies and individuals in many ways. They  are offering to give a useful FREE initial business assessment on their needs for tax saving, cost control and full compliance with current tax and company regulations..  If you like what you hear, you can then retain them at a reasonable cost to advise you on :

    • Company formations, VAT & business plans
    • Your accountancy records and record keeping
    • Your financial needs
    • Financing those needs
    • Bank Meetings
    • Making sure you get paid
    • Helping you to get extra time to pay your debts
    • Keeping your costs under control
    • Keeping up to date with your tax  (business & personal)
    • Making sure you get any tax back due to you
    • All your short and long term personal financial requirements
    • Helping with any disputes
    • Specializing in helping people with financial problems
    Either e-mail INTEGRA on:

    24 hour Hotline  Tel:Hotline
    Fax : +44(0) 845 862 1954


    Do you have clients who are approaching retirement age and have to purchase an annuity but do not want to give away their capital ?
    Revenue approved UK Insurance Companies have started marketing a NEW EXCLUSIVE PENSION PRODUCT to high net worth individuals that offers exceptional benefits to its policyholders.  Providing your clients have funds in excess of £300,000 the above problems can be solved. The NEW PRODUCT also provides a number of other solutions to problems that clients of yours may have. For further details on legal, taxation and non FSA advice
    on this page Contact us(  See PENSION RIGHTS)

    .Many bankrupts are losing their Personal Pensions as a result of the "Landau" case. A concerted effort is now being made to save Receivers in  Bankruptcy from grabbing pensions. Bankrupts can obtain legal aid to fight these cases. Drummond's new scheme introducers lawyers experienced and willing to represent bankrupts. Similar scheme available in regards divorce (  See PENSION RIGHTS)


    If you carry on a U.K. Business profitably or have access to profitable investment opportunities and ( in either case) you wish to enjoy some of the profits free from U.K. Taxation, this plan can achieve it for you.

    Underlying the arrangement money provided to an accredited U.K. incorporated resident life assurance company so as to form part of its overseas life assurance fund can be made available for investing in UK businesses or assets so as to generate tax-free business or asset profit and benefits for the participants.

    There is no need for anyone to purchase any life assurance policy or institutional investment as a condition precedent to participation. The participant is wholly responsible for the conduct and management of the trade or business activity, over which he maintains constant contact and domain. All that is needed is a profitable trading or business or investment activity; a willingness on the part of the principal to work; and an ability to provide his own financial management.

    The way the plan works involves the formulation of a partnership between a Life Assurance Company and the operator of a business being a partnership the object of which is the carrying on of the business in common as between the operators of the business in common with the Life Assurance Co. and with a view of profit for the benefit of all parties to the partnership.

    The partnership will be organized so as to operate as a limited partnership and be under the Limited Partnership Act of 1907. The usual arrangement envisages the Life assurance Co. receiving 80% of the partnership profits with the remaining 20% going to the partnership operators who nevertheless take a minimum amount - say the first £20,000 of profit.

    The object of the agreement is such that from the remaining 80% of the profits which are deemed part of an overseas life assurance fund which is not subject to United Kingdom taxation the moneys can be:

  • .Loaned back to the Managers to be enjoyed free of interest while the Management Agreement stands.
  • reinvestment in other parts of the overseas life assurance fund.
  • Transmitted as a permanent benefit tax-free to the participant through a Single Private Annuity.

  • The effect is that the 80% of the profits are “tax free”. The charge or operating this plan would be 10% of the 80% per annum.


    This is only applicable to those who are in employment, not individuals who are self-employed. The establishment of an offshore FURBS will form part of the individual commercial remuneration package as a director of a company. It will not impinge upon any existing pensions arrangements.

    A company can set up a scheme for each individual or there can be more than one member of a company scheme. If there is more than one member, each individual's fund within FURBS is kept separate.

    The FURBS is established by entering into a Trust Deed & the payment of the premium on behalf of each member. Each member is taxed as a benefit in kind on the amount of their contribution at their marginal rate for the year of contribution.

    The offshore FURS itself is tax exempt & suffers no tax( other than a possible withholding tax) on its income or gains. They are taxed on the profits on benefits taken. However the member may borrow from the FURS or get the FURS to purchase assets. ( Property, shares, works of art etc.). Any debt on the FURS by way of loan is a debt on the estate should the member die. If the member becomes a Non-UK resident he can take the proceeds Tax-free. Always accessible.
      DRUMMOND & CO. have in the past introduced many plans to professionals who wish to find the right tax efficient plans for their clients. DRUMMOND & CO. do not give any investment advice under the Financial Services Act.
    Since the Informed Investor first appeared in 1972 there has been rapid changes in getting news out. We are struggling to keep up with this.  Since 1998 we have proceeded to publish the  Informed Investor as both a Website and a faxback. Our four  websites are updated nearly daily whilst our faxback service is a little slower.


    If you have clients who are in debt or considering personal bankruptcy our Personal restart programme may be of use. Debts are re-structured and credit card debt re-negotiated. We also lead potential bankrupts through the maze of bankruptcy law.) please contact us for details.

    For further details on legal, taxation and non FSA advice
    on this page Contact::
    24 hour Hotline  Tel:
    Fax : +44(0) 845 862 1954


    is the UK financial services industry net directory. 

    It is an award-winning site which links directly to over  3000 UK financial services companies.



    As part of Drummond & Co's quest for efficient vehicles to mitigate taxation we recommend that professional financial advisers consider the use of  THE CAPITAL REDEMPTION POLICY to mitigate both Capital Gains and Inheritance Tax. It can also be used as a more proficient way to mitigate Income Tax & National Insurance Contributions. These policies are little known, but extremely useful in the field of tax mitigation.
    Drummond & Co give NO INVESTMENT ADVICE, their field is tax strategy and mitigation. For an introduction to lawyers concerned and/or taxation advice call on 

    24 hour Hotline  Tel:Hotline
    Fax : +44(0) 845 862 1954



    " Nothing is more certain than death and taxes" - Benjamin Franklin

    Mr Franklin may well have been right but the certainty that one leads to the others has been challenged for many years. Not only that but the accepted natural consequences that investment profits and gains, especially those generated by our own efforts, fall to be taxed is continuously scrutinised by the legal and accounting professions. With significant success.

    The legitimate reduction or elimination of taxes and duties which become payable on crystallising gains or death has been a professional preoccupation for many years. 

    The widely held view is that such revenues are unfair because the wealth has been created by sheer hard work, and that the tax has previously been paid on the capital or assets.
    Various governments have addressed these issues with the results that, whilst retaining the taxes, they have made them eminently avoidable through pre-planning.
    This is the position today with the current taxes, capital gains tax and inheritance tax.
    Inheritance Tax applies to the estates of UK domiciled individuals or foreign nationals who have UK based assets. However, by using the pre-death gift  allowances, known as Potentially Exempt Transfers or PETS for short, much of the tax liability can be reduced or completely eliminated. Whilst PETS are a popular facility the fact that many people do not use them is evidenced by the amount of revenue raised by the Exchequer in Inheritance Tax. Some £1.5 billion in 1995-1996.
    Further, there is a current concern that the change of the UK government could lead to the rapid abolition of PETS. The Capital Redemption Policy makes no use of PETS.
    applies to investment gains and profits, including the sale of private businesses. There are a significant number of exceptions and, over time, the ability to index original values has gone some way to mitigating the effects of the tax. Annual exempt allowances are also available for people who regularly realise gains. However, it is still very much the case that many transactions are subject to CAPITAL GAINS TAX, which can easily take 40% of the profit.  To some extent CAPITAL GAINS TAX and Inheritance Tax are mutually exclusive in that CAPITAL GAINS TAX does not apply to gains realised on death, but of course Inheritance Tax can simply replace it with the same overall effect.
    There are many reasons why PETS are an awkward solution. For example, giving your assets away will mean losing control over them and, perhaps more importantly, losing the income they generate. Your intended recipients may not be ready or capable of taking control of the assets. Or , by giving the assets away you may plan to save Inheritance Tax but simply crystallise a liability to Capital Gains Tax.
    CAPITAL GAINS TAX and Inheritance Tax are not crucial to the well being of the UK economy. The creation of wealth is vital for the UK economy. the majority of thinking people believe that their wealth should remain as far as possible in their hands or the hands of their family, colleagues or companies that contributed to its creation in the first place.

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    It is  such individuals that the Capital Redemption Policy will be of substantial use.
    It enables them, at rates which have been accepted by the Inland Revenue, to:
  • Reduce or eliminate their Inheritance Tax and Capital Gains Tax liabilities immediately, without gifting their or therefore using PETS. 
  • To secure a continuing source of benefit from the assets. 
  • To remove future liabilities to gains, profit or growth taxes on the assets and any income or value they generate. 

  • The Capital Redemption Policy is straightforward to establish. The range of acceptable assets to invest in, including private shares, land and property, and to retain is exceptionally wide. The benefits are proven.

    A Capital Redemption Policy is a capital redemption contract issued in exchange for the payment of a premium. The premium may be cash, an existing share, unit trust or bond portfolio, unlisted securities such a private company shares or other property.
    Capital redemption policies fell out of favour in the UK in 1938. Before that, they were a common product issued by most established UK life assurance companies. However, they remained in use on the Continent and following the European Union's First Life Directive in 1981 were re-established in UK life assurance and tax law. They offer many  advantages over traditional insurance contracts and, when allied to our unique structure, very significant tax planning opportunities.
    An Account is created within the Endowment Company's capital redemption business fund to measure the benefits payable under each policy from those of other policies. This creates the link between the value of each policy and the assets identified with it. As the value of these assets will fluctuate due to movements in the markets, or currency exchange rates if appropriate, so the day to day value of the Capital Redemption Policy will vary. However, it does have a guaranteed minimum maturity value.
    The terms of the CAPITAL REDEMPTION POLICY are that its duration to maturity, when it distributes the assets related to its final value, is any term you choose between 2 to 80 years. On maturity there is a guaranteed minimum value, which is established at inception, or the current Account value, whichever is the greater. The guaranteed value will depend on the term selected and the value of the initial premium. In the interim period the original owner has no right to encash the policy or receive the guaranteed value ahead of the maturity date. But, as a CAPITAL REDEMPTION POLICY is not dependent on the life of the owner, there is no medical underwriting to set one up nor is there any pay out on death.
    As there is no right to encash the policy before its maturity date the Capital Redemption Policy is valued by reference to the market value, from time to time, of the right to receive the future minimum guaranteed maturity value, NOT the initial premium paid. The value of the right to receive this guaranteed value is discounted over  the period from inception to maturity.
    For example, a premium of £100,000 would give a minimum  guaranteed maturity value over an eighty year term of £700,000. The fact that real investment performance over this period would hopefully generate a higher value is ignored as performance can fluctuate. The right to receive £700,000 in eighty years time is worth today, on the basis of a gross interest return of 6% p.a., £6,801.
    Similarly, there is no right to regular withdrawals from the funds within the Capital Redemption Policy, though there is an interest-free loan facility to ensure that moneys can be made available as and when they are needed. Loans are deemed to be withdrawals for UK income tax purposes, and are repayable on demand.
    You can appoint a Patron who has the power to monitor the activities of the Endowment Company. This added comfort ensures that you are fully informed at all times through the offices of the Patron, of all actions and transactions related to your Capital Redemption Policy.
    A CAPITAL REDEMPTION POLICY is not a policy of Life Assurance or a life annuity. Accordingly there is no life assurance mortality risk to consider. This makes the Capital Redemption Policy very suitable for those who are not in good health or may have left it late in seeking to reduce capital taxes. No underwriting at all is required.
    The policy is a valuable asset as it replaces in full the value of the Moneys or assets transferred to the Endowment Company by way of Premium. However being a capital redemption policy rather than directly owned shares or deposits for example, the taxation treatment of growth and income within the linked fund, and benefits from the policy, is distinctly advantageous


    In transferring the premium to the Endowment Company and receiving a Capital Redemption Policy in return you are in fact substituting a new, single asset for your current assets. The existing block of assets has created current or potential tax liabilities leading to income tax on interest dividends or other income arising; capital gains tax on growth in value of certain of the assets and possible inheritance tax liabilities when you eventually die and leave your estate to beneficiaries.

    The new asset you receive in return is completely different. It is a policy issued by an Endowment Company which is linked in value to a Special Account. For example, because the value you have transferred is now within a CAPITAL REDEMPTION POLICY, which cannot be accessed during the term of each policy, the value of the policy is discounted at a rate which has been previously accepted by, and agreed with the UK revenue. Just as the redemption value of certain long-term , Government gilt-edged securities trade at well below their par value, so the current discounted value of your capital redemption policy is well below the value of the assets identified with the linked fund. This discount basis will substantially reduce the Inheritance Tax liability on your death. The basis of discounting and the fact that policies of capital redemption are subject to Capital Gains Tax additionally means that CAPITAL GAINS TAX on the transfer can also be significantly reduced.
    Using the figures previously described the transfer of £100,000 of assets pregnant with the gain leads to an immediate discounted value of £6,801.

    The transferred assets form part of the Assurance Company's long  term funds and thus the taxation treatment of the Endowment Company is " wrapped around" your recommended investments. This tax  treatment currently means no liability to corporation tax on income and gains arising within the funds. Your fund essentially can grow in value on a tax free basis.
    In the meantime, you have secured access to Moneys which can effectively be structured on a tax free basis. Through the Patron you can constantly monitor the performance of the Account, and the Endowment Company. You can indicate in your will, as the CAPITAL REDEMPTION POLICY is your asset what you wish to happen after your death.
    If the Capital Redemption Policy is in your personal ownership, rather than through a company or trust, it will be valued at death, a gain on a discounted basis, and the resulting value will form part of your estate for Inheritance Tax purposes. For example, if death occurs 10 years from inception, and there is a remaining term to maturity of seventy years, then using our previous example the value attributed at death will be £11,512.
    Ultimately the Capital Redemption Policy will mature at your chosen period from inception. The maturity value will be either the minimum guaranteed value or the value of the linked account whichever is the greater. Under current and proposed legislation, this maturity value can be substantially tax free but you in mind that tax rules can and may  change.

    An example may help to explain the attributes of the Capital  Redemption Policy. Mrs. Brown is a widow aged 65. Her husband died two years ago and left his entire estate to her. Her assets are now worth £1 million and comprise of her home valued at £195,000, a savings account with a Building Society worth £55,000, an investment portfolio recently valued at £250,000 and shares in her late husbands business valued at £500,000. The gain on the investment portfolio and private shares is £600,000.
    The Inheritance Tax liability on Mrs. Brown's estate is currently £314,000. That is, 40% of £785,000 in excess of the present nil rate band £215,000. Mrs. Brown consults her professional adviser and here commends that she consider the Capital Redemption Policy. She  decides to invest £750,000 being the investment portfolio and her private shares.
    She selects an 80 year term to maturity Capital Redemption Policy with a guaranteed minimum value of seven times the initial value  transferred. That is £5.25 million. The open market value of the right to receive £5.25 million in 80 years time is today valued at £51,000.

    The value of the assets transferred were £750,000 including gains of £600,000. The Immediate open market value of the asset received in exchange is £51,008. Accordingly no CAPITAL GAINS TAX is payable.

    The transfer is NOT a Potentially Exempt Transfer. But if Mrs. Brown dies in 10 valued at that time as an asset of her estate. It will still have an unexpired duration of 70 years before the minimum value is available so the value in ten years time is estimated to be £86,340. Assuming her house and Building Society Account appreciate with inflation and absorb the entire nil rate band, this would lead to an INHERITANCE TAX liability of £34,536 at present rates. This compares with the present situation of a liability of £314,000 if no action is taken. remember also that CAPITAL GAINS TAX on the disposal has been significantly reduced.


    The premiums for a Capital Redemption Policy can only consist of assets other than cash premiums. Such Moneys must be paid in the first instance to an Assurance Company who can then pay on such Moneys to the Endowment Company. Lawyers concerned can identify Assurance Companies which are currently writing Capital Redemption Business. but these are very few.


    The Lawyer concerned is in possession of legal opinion on this scheme but will only show it to prospective clients and will not allow copies for distribution.

    E-Mail :
    For further details on legal, taxation and non FSA advice on this page Contact

    24 hour Hotline  Tel: Hotline
    Fax : +44(0) 845 862 1954

    If you have a Tapaz ID you can request more information on Capital Redemption Policies, by entering your ID and pressing Tapaz.

    Taper relief/indexation
    The chargeable gain is computed by deducting indexation allowance for periods of ownership prior to 6 April 1998 and for taper relief thereafter. 
    The rate of taper relief is different for business and non-business assets. As non-business asset taper relief is ineffective for ownership periods of less than 3 years, and as some asset disposals are identified on a last in first out basis, you may consider investing through a collective investment scheme or an investment trust. 

    Where assets have been received by way of a gift and subjected to holdover relief then the ownership period commences from the date of the transfer. Any accrued taper relief is lost. The timing of any disposal, the person making the taxable disposal and the period of ownership will have an effect on any potential tax liability. As the effect of full business taper relief is to reduce the effective tax rate down to 25% of the nominal rate ( i.e. to as little as 10% for a higher rate taxpayer), it is an extremely valuable relief. 

    There are to be changes in the budget that will result in full taper being available after 5 years. However it is not known whether the enhanced relief will apply to all business assets or only to those acquired after a set date. Non business taper is expected to continue to be available over 10 years, giving a maximum reduction of 40% i.e. an effective maximum rate of 24%.

    Annual exemption/tax rate

    Each individual is entitled to an exemption from tax on chargeable gains of up to £7100. Assets held in a bare trust for a child are treated as belonging to the child and the child's annual exemption and basic rate band is available in taxing any gain arising on a sale. The ability to use the child's personal allowance for income tax with a bare trust was removed last year. 

    Gains in excess of £7100 are liable to tax at 20% or, for higher taxpayers, 40%. You may consider crystallising a gain to use the annual exemption, or a loss in order to use the relief, by selling and buying back the asset. 

    There are, however, complicated rules that govern the identification of sales and acquisitions of stocks and shares which need to be taken into account. Trusts are entitled to a lower tax exemption ( generally £3550) and most are liable to tax at 34%. It may be possible to use holdover relief for gifts to individuals and trusts in order to realise a gain at a lower rate of tax. Clearly taper relief may be extremely valuable and care is needed to ensure that the ownership period is not effectively reduced.

    Principle Private Residence (PPR) relief
    Each married couple is allowed an exemption from capital gains tax on the disposal of a property occupied throughout the period of ownership. If you occupy more than one property it is possible to nominate that which is to be regarded as the PPR by making an election. This has to be done within two years of acquiring the alternative residence. A property owned by a trust, but occupied by a beneficiary as a main residence, may also qualify for relief. The last three years of ownership are always to be regarded as a period of occupation. This may allow some planning to be undertaken in order to provide relief for what has generally been an investment property.

    Hold - over Relief

    Gains can be held over in a number of circumstances. For business assets, relief is available where replacement business assets ( property, goodwill, etc.) are acquired. Relief is also available on the incorporation of a business.

    For assets generally, it is necessary to subscribe for shares in a qualifying company or a venture capital trust ( subject to certain monetary limits). In addition to providing for deferral of the capital gains tax charge, at up to 40%, there may also be an income tax reduction of 20% where the company qualified under the Enterprise Investment Scheme or as a Venture Capital Trust. Gains arising on gifts of business assets to individuals, or on the transfer of any asset into a discretionary trust, can also be held over. In the November pre-Budget report it was announced that it is no longer possible to holdover a gain on certain gifts into a company. Gifts to charities are free of capital gains tax. From April 2000 you should be able to make a gift of quoted shares to a charity, avoid any capital gains tax and get income tax relief on the gift.

    Retirement Relief

    Where the taxpayer is at least 50 years old, part of the gain on the disposal of an interest in a business, or shares in a personal company, may be free of capital gains tax. The relief is being phased out over the next three years; for disposals before 6 April 2000 the exclusion is £200,000 plus half the excess up to £800,000. The balance qualifies for taper relief. A deemed disposal can be engineered through a transfer into a trust.


    The date of contract is normally taken as the date of disposal unless the contract is conditional, in which case it is when the condition is met. It may be possible to defer the date of a disposal, and thus the due date for the payment of tax, through the use of conditional contracts or options. If this is of interest you should take professional advice to ensure that the arrangements are implemented effectively.
    Labour governments have often favoured a tax on death and on capital transfers. Whilst generating relatively little tax, it looks increasingly likely that inheritance will not be strengthened until after the next election.

    There are, however, features that may be curtailed. In last year's Finance Act, the ability to gift an interest in a residence, whilst continuing to live in it, was severely restricted.

    It is important to note that the basis of valuation for IHT is the "loss to the donor" rule i.e. how much worse off the donor is, not how much better off is the donee. It is also important to note that property owned by the husband and wife may be related for valuation purposes.

    Although transfers between UK domiciled couples are exempt, husband and wife are regarded as separate persons and have their own reliefs and exemptions. In appropriate circumstances the reliefs may be doubled up by husband/wife transfers followed by a gift to the intended beneficiary.

    Exemptions and Reliefs

    A very useful relief, for those with surplus income, is that for normal expenditure out of income. The gift should leave the donor, over a period of time, with sufficient to maintain their normal lifestyle. However, a pattern of behaviour needs to be established in order that the expenditure can be regarded as normal. For substantial, ad hoc gifts, the potentially exempt transfer (PET), which becomes exempt provided the donor survive 7 years is considered to be very generous as there is no monetary limit and the gift can be into certain trusts. Last year, a requirement was imposed on executors to report the value of gifts made in the 7 years prior to death.

    Monetary limits may be introduced in relation to PET's and the survival period could be extended. For smaller gifts the annual exemption of £3000 ( which may be carried forward one year) should be used regularly.

    A  labour spokesman has said that the nil rate band ( currently £231,000) is considered to be reasonable in the context of the current rate structure. A lower limit may, however, be introduced together with a lower tax rate for modest transfers. The nil rate band is particularly useful in the context of transfers into discretionary trusts, especially as capital gains tax holdover relief may also be available. This relief could well be removed.

    The 100% reduction in value for the transfer of some business and agricultural property has often been suggested as being extremely generous, especially as there is no capital gains tax on assets owned at death. One or other could be restricted.


    Whilst it is, at present, possible to vary the way an estate is distributed, it may not be practical to do so. All parties affected must agree to do so within two years of the date of the death. Where infant children or charities are beneficiaries, the problems multiply. Further, the ability to vary a will has been challenged in parliament in the past and the tax efficiency of doing so may be curtailed in the future. The most sensible course of action is for taxpayers to ensure that they will have a will and to continually review their circumstances and the consequences of leaving a will unamended.

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