Group think is a shocker.

As a kid you knew it as peer pressure. It made you do the strangest of things. You bought bad clothes and drunk bad cider but sooner or later it passed, as most phases do. You grew up and started to know your own mind.

But is it that simple?

In property circles there is a creeping group think affecting anyone spending more than a few hours in the proximity of a property training event.

It was a reaction to a crisis. It started with a whisper that grew into a roar and sooner or later everyone knew what it was; or at least they had a soundbite so they could sound like they knew what they were talking about.

The words “Clause 24” wailed in people’s heads like a faraway car alarm. And it was terrifying.

If you’re happily ignorant, Clause 24 is a natty device which deprives property investors holding property in their own names of the vast majority of their previously cherished tax relief for mortgage interest. It was brought in to “level the playing field” between corporates and individual investors.

That is of course hogwash of the highest order.

It was a blatant tax grab and a sop to those in the city who wanted institutional investors to hoover up vast tracts of 2 up/2 downs up and down this fair isle.

Regardless of its intent it focussed minds. In unequal measure it has forced people to sell up or change the way they hold their real estate.

But change how?

There existed a vacuum of knowledge. Capitalists abhor a vacuum so into that breach poured advisors of all shapes, sizes, and abilities each with a way out of the madness.

As tends to happen a settlement was arrived at. A universal conclusion reached as to what the “right” thing to do was. Slowly, surely, and in unconscious unison, a collective policy was made.

We shall incorporate; one and all.

What do I mean by that? I mean you sling it into a company and act all grown up and professional like…

A property investor?

Me? No. I’m Director of a Property Investment Company.

Therein lies the problem.

In a headlong rush to solve the issue at the tip of our nose we have ignored the whopper of a problem around the corner.

What’s that problem?

It’s called Inheritance Tax (IHT) and it is ugly. You want 40% of everything I have you say? Are you having a giraffe mate?

Now the good news is that if you’re a farmer you’re OK. You’ve got agricultural relief. Hand over the cows, tractors and all the tattersall check you like and HMRC won’t take a bean. If you’ve got a business which makes things and provides a service (like in the olden days) and your kids want it, they can have it.

No IHT, that’s Business Relief.

Winner.

But do you know what? A property investment company is going to be your worst enemy when it comes to estate planning. It’s going to bite you in the rear to the tune of 40% Inheritance Tax.

You’ll be dead though.

Who cares?

But you do care, don’t you? What’s the point in working hard to build a legacy if the suits are just going to take 40% of it?

So, don’t listen to the madness of crowds.

If you’ve incorporated your property company, I’ve got a solution.

If you haven’t incorporated stop right there and take a breath.

Read on tomorrow and all will start to become clear.

All the best,

Stephen Wallis

Copyrighted and published by FOAR Ltd