Date: 23 September 2008
The significant turmoil in financial markets clearly will be having an impact across the board. Arguably, such turmoil and consequent asset depreciation is likely to be a feature for some time.
Areas which are likely to be impacted upon include:
- Real estate and other assets whose value is underpinned by such property;
- financial assets, particularly stock market portfolios;
- other general business assets, particularly enterprise value, goodwill and tangibles; and
- shares in unquoted trading companies.
The current financial malaise is widely predicted to continue for some time. It would appear that financial markets, promulgated by overzealous lending on the part of financial institutions are likely to have a continued impact on the UK economy and increasingly a technical recession and a slowdown are very much on the cards.
Plainly this has a number of impacts, not least of all:
- There would appear in some instances to be little activity in certain markets, particularly for business transactions; and
- the residential (and the commercial) property market is very much hampered by the unavailability of finance, with the result that there is no market in certain areas, particularly business disposals.
This brings with it a tax planning opportunity, as with depressed values there is additional flexibility to transfer assets in a number of scenarios, consider business reorganisations and take advantage of the depressed state of markets to hopefully facilitate longer term planning when asset values turn and start to reflect, in a more sustainable way, their long term value.
In the Capital Gains Tax legislation there is a presumption of a willing buyer and seller, which in the current market, particularly for real estate, can significantly dampen value.
A number of opportunities exist, including:
- Transferring assets standing at a loss to crystallise a capital loss;
- IHT Planning with Trusts;
- disincorporation of businesses where goodwill value has diminished ;
- development of equity incentive plans; and
- non-domicile planning.
Each situation needs to be assessed on the merits of its own facts. Please contact our Tax Partner Anne-Maree Dunn on 01727 838 255 If you wish to discuss the possibility of transferring value at depressed prices to achieve a significant benefit through what can be simple, but very effective planning.