Jim and Janet had developed a business park on their land valued at £3m. One of the commercial units was used to run a successful trading business with significant profits. The total rental from the site was in the region of £125k per annum. The business was structured as a partnership exposing all the profits to highest marginal rate of tax and for the income that exceeded £100k this was an effective rate of 60%.
Their lifestyle could be supported with an income of £80,000 gross per annum and they wanted to reduce their income tax bill and IHT liability. Their aim was to extract enough money to purchase a holiday home in the Scottish Highlands.
What we did
Astute recommended a business restructure, incorporating the trading business and transferring some of the commercial buildings into the new Company. A Small Self Administered Scheme (SSAS), a type of UK Occupational Pension Scheme was established and funded by payments from the new Company. Jim, Janet and their two children were included as members of the pension.
This is ongoing planning as each year more of the property value is being sheltered from future inheritance tax, ensuring more of their hard earned wealth passes to their children and grandchildren.
What we achieved
Jim and Janet’s income tax was immediately reduced by over £40,000 p.a. The Inheritance Tax liability was reduced by £320,000 and a Directors Loan account was created within the new Company for £800,000; more than sufficient to purchase their holiday home.
More importantly, they have now retired from their business and are enjoying all that life has to offer. Having worked seven days per week, this has been a dramatic and thoroughly rewarding lifestyle change for them.