Inheritance Tax on Gifts

Inheritance Tax (IHT) is said to be the only “voluntary” tax. As with inheritance tax mitigation, it is possible to reduce liability or remove it completely.

The Nil-Rate Band

The nil-rate band is the value of an moneyestate that is not subject to Inheritance Tax in the United Kingdom.

The current nil rate band values at £325,000 per person. Anything above the nil rate band can be subject to Inheritance Tax upon death. In other words, do nothing and 40p in every pound of your inheritance or estate may be winging its way into the government’s pockets so it’s important to understand just how tax mitigation can work.

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Protecting yourself against the rise of Cyber Crime

At Matrix Capital, we place a great deal of importance on data security.  Understanding the fast paced nature of cyber crime too; we recently attended a seminar on the issue to ensure we stay on top of the developments and risks.

Following this, we thought it would be useful to share some of the insight gained that will benefit our business owner clients and professional connections too.

First of all, some ‘did-you-knows’ that might help to put this subject into context:

  • £21.2bn is the cost of fraud to the private sector in the UK
  • 1 in 4 business have been the victim of fraud
  • 39% of businesses do not invest in any type of fraud prevention
  • Over one third of incidents are linked to cyber crime
  • 82% of firms believe they are too small for a cyber-crime attack

… Of course on a more personal level and unfortunately happening all too often – being a victim of fraud can and has quite frankly ruined people’s lives.

Types of fraud on the rise

  • Invoice or Mandate Fraud – receiving communications claiming to be from your client or supplier suggesting their bank details have changed, and for you to update your records.
  • Vishing – a type of telephone fraud that deceives people into revealing sensitive information.
  • Spear phishing – a targeted email that appears to be from an individual or business that you know, using ‘social engineering’ to have gathered specific information about you to make their communications seem more tailored and realistic.

Spear phishing was certainly the most worrying, as victims are much more likely to engage with whatever type of request is made (from bank details to visiting a harmful website), given the nature of the content.

So, be wary of what you post online and through social media – perhaps try typing your name into Google now and see what you can find, remembering if you can find it – others may be able to too and the information could be used against you.

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Financial Advice: Independent Vs Restricted

Since the Retail Distribution Review (RDR), or in other words the new set of rules formed with the aim of introducing more transparency and fairness in the investment industry; financial advisers have to offer either ‘independent’ or ‘restricted’ advice… and it’s important to know the difference.divided-apple-1171062-639x508

It has been recently highlighted in the media that these terms aren’t very helpful to consumers, especially without much description as to what they actually mean.

Matrix Capital are completely Independent. The distinction between the two is whether recommendations are limited to certain products or product providers (restricted) or recommendations are ‘whole-of-market’ (Independent).

For a firm to be independent, they must be able to undertake comprehensive and fair analysis of the relevant market which is both unbiased and unrestricted.

Being independent does put additional pressure on firms to ensure they establish and maintain adequate knowledge of the many retail investment products in the market. There are also increased compliance costs attached to firms who offer independent advice.

It’s usually a lot easier to identify an Independent Financial Advisory firm (IFA), who are perhaps more inclined to promote their status. However, some restricted advisers are not calling themselves as such; an issue for people looking for advice who should be able to define this without difficulty.

Restricted firms should offer an explanation about whether their advice is limited to retail investment products from a single company, a single group of companies or a limited number of companies.

Importantly, neither independent nor restricted advisers are incentivised to recommend one product over another.

In summary, if you are getting advice about investing your money, you need to know there are two different types of financial advisers – ‘independent’ and ‘restricted’. This can affect the advice you are given.

All financial advisers have to be approved or authorised by the Financial Conduct Authority (‘FCA’).



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The Chancellor’s second Budget of 2017

Mr Hammond will probably be pleased if commentators decide that his Autumn Budget was a steady-as-she-goes, broadly modest Budget. After the national insurance u-turn he was forced to make after his March Budget this year, that was probably his aim.

In any case, for a variety of economic and political reasons, the Chancellor announced a relatively modest net tax giveaway of just under £1.6 billion for the coming tax year.

His main attention-seeking move was to give first time buyers an exemption from stamp duty land tax on the first £300,000 of value for properties worth up to £500,000. Rumours – probably from the Treasury itself – had trailed changes along these lines, and the new relief represents more than a third of his net giveaway.

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Press release – top award for financial experts

As published on the Shropshire Live website here.

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ITV Weather Presenter Emma Jesson at the Awards ceremony

A leading Midlands firm of Chartered Financial Planners have snapped up another prestigious award.

The team from Matrix Capital, based near Bridgnorth, have been named Financial Planning Company of the Year at the annual West Midlands Insurance Institutes competition – the second time they’ve taken the title in the last three years.

Robin Melley, for the chartered financial planners, said: “We’re absolutely delighted to have received such high profile recognition for the services we deliver, and to have taken the award twice is a wonderful boost for our team.

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Use it or lose it!

The retirement planning landscape has changed; and in my view, pensions have now become a very attractive means of investing for the future to provide a future income and to protect wealth. Yes – protect wealth!

The new pension flexibilities and the changes to the death benefit rules have swept away moneymany of the obstacles in people’s minds regarding pension contributions. We are now seeing a reversal in negative attitudes towards pensions, particularly amongst our more affluent clients.

Instead of restricting pension contributions, we are now being asked to calculate the absolute maximum that they are able to contribute to their pension – so, why is that happening?

Here are two significant reasons:

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Revenge of the SIPP

piggy bankThe SIPP has been cropping up a lot in the pensions world but what is a SIPP and why the sudden attention? A SIPP (or Self Invested Personal Pension) is fast becoming an alternative to a more traditional personal or stakeholder pension with the theory being that a wisely-invested SIPP can grow your pension pot more than a normal pension could.

A SIPP is a type of personal pension and works in a similar way to a standard personal pension with the main difference being the level of flexibility within the wide range of investments you can choose from, manage yourself, whilst potentially consolidating your existing pensions in one place, all of which allow you to manage how you invest your retirement funds.

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Who’s Involved in Selling a Business?

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Selling a business is not easy – selling it well is quite a challenge. This will be one of the most important transactions a seller will ever undertake and being properly prepared and having the right advisers around him/her is critical to achieving a good outcome.

The Team & Roles

A Business Broker will advise on business valuation, lead the marketing activities to identify potential buyers, support buyer meetings, manage the negotiations, draft the Heads of Terms and coordinate the legal stages.

A good broker will charge only a small amount upfront (enough to ensure commitment from the seller), with the majority of fees contingent on success.

An Accountant will advise on the tax implications of a sale, including share vs assets, how to handle surplus cash in the business etc The accountant also needs to be proactive in producing up to date financial information, both statutory and management (a potential buyer understandably has a strong thirst for up to date information) and also support the due diligence process.

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Reduction to money purchase annual allowance (MPAA)

At Spring Budget 2017 the government announced that from 6th April 2017 the money purchase annual allowance (MPAA) will reduce to £4,000. Legislation will be included in Finance Bill 2017.

Anyone who has already triggered the MPAA may wish to consider making maximum use of the current £10,000 MPAA prior to 6th April. Once triggered, it is not possible to use carry forward to increase the MPAA.

As a reminder, we have included a list of the actions that trigger the MPAA and our full guide is available at the link below.

The following will trigger the MPAA (either from a UK registered pension plan or from an overseas scheme that has had UK tax relief)

  • Taking income from a flexi-access drawdown (FAD) plan (includes short term annuity purchase) – only withdrawing tax free cash won’t trigger the MPAA
  • Taking an uncrystallised funds pension lump sum (UFPLS) – if the UFPLS is £10,000 or less, see if it’s possible to take the funds as a ‘small pot’ instead as this won’t trigger the MPAA and isn’t a Benefit Crystallisation Event (BCE).
  • Converting capped drawdown to FAD and then drawing some income
  • Taking more than 150% GAD from a capped drawdown plan
  • Receiving a stand-alone lump sum when entitled to primary protection and Tax Free Cash protection is more than £375,000.
  • Receiving a payment from a flexible lifetime annuity (ie. one where payments can decrease)
  • Receiving a scheme pension from a Defined Contribution (DC) arrangement where it’s being paid directly from those DC funds to less than 11 other members (e.g. a SSAS).
  • In addition, anyone who was in the old ‘flexible drawdown’ before 6th April 2015 is subject to the MPAA from 6th April 2015 (irrespective of whether they have taken an income withdrawal before then)

The above relate to a member and their own funds – these triggers don’t apply where benefits are being paid to a dependant/beneficiary (eg. where a beneficiary receives a FAD income payment from a dependant’s/nominee’s/successor’s FAD arrangement this isn’t a trigger).

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MPAA and Implications of Reduction

From 6th April 2017, the Money Purchase Annual Allowance will fall from £10,000 down to £4,000 for those who have accessed their pensions and are taking an income. This strategy is clearly aimed at setting the allowance as low as possible without impacting on Auto-Enrolment.

For the purposes of the consultation, the Treasury outlines the situations where ‘accessing a pension flexibly’ – and therefore the new cap – applies:

  • Flexi drawdown including short term annuities.
  • Taking a lifetime annuity that allows actual or possible decreases in the amount of annuity payable.
  • Taking an uncrystallised funds pension lump sum.
  • Those without earnings who cannot normally “recycle” pension withdrawals by putting money withdrawn from a pension back into a pension, although contributions of up to £3,600 can be made, unsupported by earnings.
  • A stand-alone lump sum payment, made where the person has primary protection and a protected tax-free lump sum right which is greater than £375,000.
  • Where a pension scheme delivers the DC pension directly – a “scheme pension” and there are fewer than 12 individuals receiving a scheme pension.
  • Payment of one of the types of benefits listed above is from an overseas pension scheme that has benefited from UK tax relief.
  • The MPAA restriction applies from the day after the above trigger event has occurred.

Pension options that do not constitute accessing benefits flexibly include:

  • Receipt of a pension commencement lump sum.
  • An individual commences flexi-access drawdown, either by a new designation or through conversion of a capped drawdown contract, and does not receive any income.
  • An individual holds a capped drawdown contract that was set up before 6th April 2015, and does not receive income above the maximum income limit for the contract after 5th April 2015.
  • Receipt of payment from a standard lifetime annuity or scheme pension.
  • Receipt of a small lump sum or trivial commutation lump sum.
  • Receipt of income from a dependant’s drawdown contract.

Once triggered, the restricted allowance applies for the rest of the tax year and each subsequent year. Perhaps most importantly it is not contract-specific: if it applies, it covers all of a client’s money purchase arrangements.

If contributions exceed £10,000 in 2016/2017 or £4,000 in tax years from 2017/2018 onwards this will result in an annual allowance excess, with no option to carry forward from earlier years.

The remainder of the standard annual allowance – called the ‘alternative annual allowance’ – can be used to accrue defined benefits, to which carry forward can be added.

In most cases, the trigger event will occur part of the way through a tax year. As it is only money purchase contributions after this that are tested against the MPAA, that year must be apportioned. Contributions that were paid before the trigger are tested against the alternative annual allowance along with defined benefit accrual; all other contributions are tested against the MPAA. For instance, a monthly contribution to a group personal pension of £1,000 gross paid by a member who triggers the MPAA half way through the tax year will have the following annual allowance test: £6,000 tested against the MPAA; £6,000 tested against the alternative annual allowance.

Subsequent tax years are much simpler because the MPAA applies for the whole year.

Planning Opportunity

With this in mind a good trawl through the client bank is necessary, and all clients approaching the stage where they may access benefits need to be notified that the next 2 months or so is vital to their financial planning, with the option to pay the maximum allowance using carry forward still available, allowing a contribution of up to £170,000.

Sean Donald – Chartered Paraplanner, Timebank

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