Belfast Telegraph

Friday 22 August 2014

If you are unhappy with your bank, how easy is it to change?

Michael Graham, Lisa Bryson, Laura McElroy

Q: I signed my house over to my children about 10 years ago in order to avoid inheritance tax but have heard that this might be challenged by HM Revenue & Customs. Is this correct?

Michael Graham, associate solicitor, private client department at Cleaver Fulton Rankin Solicitors replies:

A: Despite what some people (and even some professional advisers) think, there has been legislation in place since 1986 which limits an individual's freedom of action to make gifts with the aim of reducing their inheritance tax liability.

In most circumstances, an outright gift of money or other assets will amount to a 'potentially exempt transfer' or 'PET', with the result that the value of the gift will cease to form part of the donor's estate if they survive for a period of seven years following the date it is made.

However, if the donor continues to have any use of the assets gifted, however minimal, without paying full value for that use, then a gift with reservation of benefit may have occurred. The result of this is that the asset will continue to form part of the donor's estate and the seven- year-rule will not apply so that the donor's estate would be taxed as though the asset had never been gifted.

The most common example of this situation which tends to arise is where parents have gifted their home to their children outright but continue to reside in the property.

Without paying a full market rent to their children following the transfer or permanently vacating the property, then a reservation of benefit would arise. Any reservation of benefit, however small, will cause the gift to fail. It should be noted however, that the property itself will have actually passed to the ultimate beneficiary and will therefore form part of their estate as well, with the potential for a 'double whammy' if both donor and beneficiary were to die.

It is also important to be aware of other arrangements which fall short of an outright transfer. For example, if a parent gives money to a child who then uses those funds to purchase a new property (or renovate an existing one) in which the donor subsequently lives, then this could also have negative tax implications.

While such an arrangement would not amount to a gift with reservation of benefit, it is likely to fall foul of the 'Pre-Owned Asset Tax' legislation introduced by the Finance Act 2004, which would require the donor either to pay a market rent or incur an income tax charge personally. Alternatively, they could make an election that the asset remains in their estate for inheritance tax purposes.

Q. Do we have to allow staff paid time off to look after children or dependants who have swine flu?

Lisa Bryson from Carson McDowell solictors replies:

A: Employees have the right to take a reasonable amount of time off work to deal with unexpected or sudden emergencies affecting their dependants.

Dependants include spouse, civil partner, child, parent and those who rely on the employee for assistance or to make arrangements for the provision of care.

The legislation does not specify what a reasonable amount of time would be, although it is generally felt that one or two days should be sufficient to deal with any such crisis. Here, caring for a dependant with swine flu may require more time away from work.

The legislation provides for unpaid leave only. Some employers do choose to pay for such absences at its discretion.

Q: I'm unhappy with the service I'm getting from my bank but am not sure if it's worth the hassle of changing. Have you any advice?

A. Laura McElroy from Invest Northern Ireland's Business Improvement Services Team replies:

A: If you're not happy it is definitely worth considering moving banks, or at the very least negotiating a better package with your current bank.

Before you approach another bank you should do some research into how your current bank compares with others in terms of interest rates, overdraft charges, monthly fees, charges for statements, cheques and cash payments into the account and so on.

Many banks are currently offering good introductory packages that are worth checking out. However, bear in mind the disruption and the time it can take to move your account, as well as losing the relationship you have built up with your current bank over time.

Before making a decision it is a good idea to talk to your bank about why you are unhappy.

Armed with the comparable rates and fees offered by other banks you may be able to negotiate a new deal. Your bank will probably not want to lose your custom and should be prepared to listen and respond positively to your concerns.

If after meeting with your bank manager you still feel you want to move to get a better deal or better service elsewhere, you can smooth the process by taking an organised approach.

There is a lot of very good information to help with this process in the Transferring Business Accounts Between Banks section of www.nibusinessinfo.co.uk.

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