UK Avoiding IHT and CGT on inherited property company


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Hi,

At present I'm a property developer who runs a business through a ltd company. I only deal with developments for re-sale however I've recently been looking to buy some properties for long term gains with the end goal of passing the company and it's assets on to my children when i die. My intention is to use the existing propco to purchase and hold the assets but set up a separate devco to continue future development projects for re-sale.

Regarding the future of the propco, from what I've read about passing on assets which only generate rental income to it's director(s), they tend to suffer the full force of IHT when this is the main source of the deceased income (or at least over 49%), so I'm wondering if the below would be a feasible strategy in order to successfully avoid IHT on the assets and have my children avoid any capital gains tax when they inherit the company?

Strategy:

Remove myself as director of the propco and place a discretionary trust in my place holding 100% of the shares, the children as the beneficiaries to the trust and myself as the trustee managing the trust. My will and article of association would instruct that the beneficiaries of the trust are to be placed as directors when they come of age. My hope would be that the children would continue to grow the portfolio as directors or use the same strategy for their children and so on so fourth. I would not be looking to take a salary from the propco under this new format.

A few questions come to mind on this which I've not been able to find an answer on google.

1. Is this strategy actually legal and can i simply remove myself as director and replace with a trust?

2. If this strategy is actually possible would it achieve what I'm after (0% IHT on the assets in the propco from my estate and 0% CGT for the beneficiaries) ?

3. Would CGT need to be paid on the closing down of the trust, as it would have been the only shareholder to a property investment company who's sole activity was rental profits? If yes would it make any difference If the trust never took a salary/dividend from the company?

4. Would my devco be allowed to borrow funds from the propco to finance any future developments on the agreement the loan is paid back within the year?

5. If i needed to, would i be allowed to take a salary from the propco as I'm the trustee of the trust holding the shares?

6. More of a broader question not taking the exact scenario above in to account. If both companies (propco + devco) were successfully running side by side with me as the sole director (no trusts) but i only ever took a salary/dividend from the devco, would IHT still be payable on the assets of the propco once i'm gone? I'm wondering whether HMRC would be calculating the funds received in to the deceased estate or the total value of the deceased shares whether profitable or not.


Appreciate any assistance on the above.

Thanks for taking time to read.
 
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