10 Minute Presentation on Tax from Lumisi Business Club member ESRG.

1. Lumisi Presentation

2. Asset Protection Partnership:
Who can benefit?
Individuals with valuable investment assets, such as buy to let /
commercial property, the value of which they would like to
remove from their estate without losing access to rental income
and / or the underlying capital.

3. Key benefits
• Save 40% IHT on the value of investment assets subject to
Individual surviving 7 years from implementing the planning.
• Individual may still benefit from (and control) the capital and
income as a Partner.
• Can be used to deal with future increases in value of the
estate as well.
• The planning is ideally suited to land and property as can be
implemented without a Stamp Duty Land Tax (SDLT) charge.
• We would not recommend using this planning for the main
residence.

4. Examples of planning
• An individual has £1m of investment property, which will be subject to
IHT of £400k.
• Sells property to Partnership though consideration is left outstanding
by means of an IOU.
• There is no SDLT or any other taxes on the transfer of the property by
the individual.
• The individual then decides to give away the IOU to a third party (say a
child), which creates the reduction in the estate. Assuming the donor
survives 7 years then the value falls outside of IHT.
• The IOU is only repayable after death creating a significant discount on
the value of the IOU given away meaning an immediate reduction in
the value of the estate even if death occurred a matter of months after
the planning was implemented
• As the individual is giving away value rather than the assets, then the
client can still benefit from the income and capital (therefore could
still use, say, the rental income from the property portfolio.)

5. Entrepreneurs’ Relief Finance Bond (ERFB)
Who can benefit?
The ERFB provides a means of releasing value from a Client’s
trading Company. The idea is suitable for the shareholders in
unquoted trading Companies which qualify for Entrepreneurs’
Relief.
Key benefits
• Crystallise value net of 10% CGT Entrepreneurs’ Relief
• Provide a tax-free drawdown facility for the next few years
payable from the business profits
• Participate in the proceeds of any future sale assuming the
Company has increased in value.
• Remain as a Director of the Company so absolutely no change
to the day to day activity of running the company.

6. Overview of steps
The main steps are as follows:
• The Shares in the Company are sold at market value to a UK
Investment Company. This will crystallize a CGT charge. After
the benefit of Entrepreneurs’ Relief this will be taxed at 10%.
• The consideration is left outstanding as a debt.
• A bond is established by the Client which will benefit from the
net value of the Company going forward.
• The Company will continue to trade with the vendor retained
as a Director of the Company.
• UK Investment Company will pay off the outstanding debt
over the next few years out of the profits of the Company
increasing the net value of the Company.
• On a future sale of the Company, the Client may again benefit
from those proceeds.

7. Corporate annuity retirement benefit scheme (CARBs)
Who can Benefit?
CARBs has been designed to allow UK employers with key staff the ability
to provide potential retirement benefits for those individuals without the
restrictions applied to UK pension schemes but also without having to
specifically allocate funds year on year meaning the CAS can be used as
part of a long term retention package where benefits only vest in the
future.

8. Corporate annuity retirement benefit scheme (CARBs)
Key benefits
The key benefits for the Employer are:
• Full tax deduction in respect of the contributions as long as
wholly and exclusively for the purposes of the trade
• Incentivise, reward and retain staff in an efficient manner
• No issues with ‘disguised remuneration’ rules
The key benefits for Employees are:
• Employee may currently get tax relief on contributions to a
pension scheme of £50k per annum (soon to be £40k per
annum). This structure is outside of this limit.
• Currently, an individual can only have total tax relieved
pension savings of £1.5m (soon to be £1.25m) without
clawback of that relief. This structure is outside those rules so
could be used as a ‘top hat’ structure or instead of a
registered scheme.

9. A Brief overview of the steps
A brief overview of the steps:
• Employer decides alongside the Individual the remuneration
strategy. Individual may agree on salary sacrifice in the hope
of receiving a pension contribution in to the new
arrangement.
• A discretionary award is made to a third party Life Assurance
Co on behalf of multiple employees. It is important that this
fund is not earmarked for any employee.
• Life Co holds the funds in the investment. On retirement the
Employee may receive the award of an annuity entitlement
from the life company.
• When paid, this annuity is taxable as retirement income. If
the Employee is non-UK resident when receive then likely not
taxable in the UK.

10. Stuart Stobie T E P
ESRG Taxation Limited
Contact information :
Office : 01244 304 035
Mobile : 07800871507
Email : stuartstobie@esrg.co.uk