The Guardian has reported this morning on reaction to the death of the late sixth Duke of Westminster, including this comment;
Pressure groups are calling on the government to publish its new central register of trusts, which names their beneficiaries and settlors. They want an obligation to publish annual accounts for those collections of assets deemed to have public interest, such as the thousands of acres of urban and rural land owned by the Grosvenor family.
Richard Murphy, the chartered accountant and political economist whose ideas have been adopted by the Labour leader Jeremy Corbyn, said the latest chapter in the history of the Dukes of Westminster highlighted the need for reform.
“We should require that these trusts publish their annual accounts just like a private company,” said Murphy. “And we need a register of trusts. The need for privacy around some trusts is understandable. But where there is public interest, where they are trading, where there are substantial assets over a a certain value, the accounts should be published.”
I make the point with care: there are some trusts where there is very little public interest because of their scale or lack of taxable impact meaning that publication of accounts may not be necessary but it remains the case that far too many trust are used for serious tax planning, often in complex structures designed to perpetuate the concentration of wealth in ways that are harmful to society as a whole. It is absurd that we grant anonymity to those trusts. The time for action has arrived.
I was also pleased to see John Christensen of the Tax Justice Network quoted in the same article saying:
For people who are really wealthy, inheritance tax has become an optional choice. If you are lucky to be born into a very wealthy family you will be untaxed. For most normal people this is extraordinary and unacceptable.
Wealth that has become concentrated in the hands of a very small minority. Without some kind of wealth tax those concentrations will simply continue to become greater and greater. I think there should be complete reform of inheritance tax.
I agree.
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But a company doesnt need to publish accounts. An unlimited liabilty company doesnt have to. Are you saying that trusts are limited liabilities organisations.
I also think the media is really unfair. A young man has lost his dad, something he was expecting this month or year. Yet certain papers are attacking his money. I am sure all he wants is his dad back.
I see no reason at all why unlimited companies should not publish their accounts
Or large partnerships come to that
And as for your last comments, please live in the real world.
Of course it’s become an ‘ optional choice ‘; the government planned it that way . It’s government policy to maintain vast inequality of wealth . If it wasn’t it would change its policy and tax massive inherited wealth tomorrow . And , I would add ( just to amplify a comment I made elsewhere on this blog ) if it NEEDED the tax it would change the law tomorrow. As the fabulously wealthy Leona Helmsley said ” We don’t pay taxes . Only the little people pay taxes . ” Welcome to the plutonomy .
I’m not sure if inheritance tax would have been the best option, in this case.
£3 billion tax owed, the government can certainly do with, however I would imagine to fund this the Duke would have had to sell off many assets, expensive paintings, land, etc etc…
Foreign investors, I would say would swoop in to quickly snap up some assets at a bargain price. So, if we push for inheritance tax for the very wealthy, what we will end up with is asset stripping privately owned UK heritage.
What would be a far, far better idea would be LVT…. smaller amount of tax taken yearly that isn’t going to result in massive amounts of UK assets sold off abroad.
(I hope i’m not sounding too right wing when I say this!)
Afternoon Richard.
As a tax lawyer specialising in inheritance tax matters, I am continually amazed at how poorly designed business and agricultural reliefs are (though perhaps I shouldn’t be; they were after all codified in Inheritance Tax Act 1984, which was a Thatcher creation).
It wouldn’t actually take much to tweak the inheritance tax system to make it actually work in cases like the Westminster estate.
The big ‘get out of jail free’ card for estates like this is that, as you say, their value will be largely tied up in private business and/or agricultural holdings, which qualify for 100% relief from IHT.
Now, I can see the logic to this. Plainly, it isn’t good for a genuine trading business or agricultural enterprise to have 40% of its value sliced off every time the owner dies. that would destroy most businesses, and would obviously lead to unemployment/frantic selling off etc etc.
The problem with it is – there is no limit on the value to which these reliefs applies. Take Virgin, for example – even leaving aside Branson’s domicile and other issues, Virgin is ultimately a privately held company. So no matter how much it’s worth, the Bransonlets will be able to inherit it pretty much tax-free. What’s more, if they decided to liquidate it a few weeks after Branson dies, they would take the whole cash value free of inheritance tax. That’s clearly ridiculous.
Instead, how about using a system that already exists in inheritance tax terms? For certain heritage assets (usually pre-eminent artworks), there is a system dating back to old ‘estate duty’ (as IHT was called way back when) whereby such assets could be passed down free of tax – until such time as they were sold, when the rate of tax in force at the time of the original death was applied to the sale value.
Why not do the same for business concerns? Have conditional exemptions enabling the business to remain intact on the owner’s death (which generates a dividend stream for the new owners on which they pay income tax in the normal way) but, if the business is transformed into a non-trading business (e.g. renting properties out) or sold, inheritance tax becomes payable in full at that point.
That way businesses can remain untaxed as long as they are maintained, and taxed if cash value is realised.
That uses a mechanism which most personal tax lawyers and accountants will already understand. Why not do that? (rhetorical of course – I know exactly why no Tory government would ever make such a change!)
It’s a neat idea Tom, especially for businesses where CGT is also cancelled on death and rebasing occurs despite the IHT exemption (unless I have forgotten something and I am not looking it up tonight)
The alternative is to say the new owners acquired the CGT base cost of the person dying and abolish entrepreneur’s relief and align rates with income tax
But yours may be neater
Thanks
All charitable trusts with income over a certain amount have to publish their accounts…
But that is nit the issue I am addressing