A Personal Journey, A Professional Calling: Inheritance Tax Advisor and Estate Planner
How Wasting My Inheritance Inspired Me to Help Others Avoid Doing the Same
The seed of my journey to becoming an expert in tax and estate planning was born at my mother’s death in August 2001, though it was another twelve years before I began to make a career of it.
My mother died intestate shortly after my eighteenth birthday, leaving me her house. Following this, there were two significant events that led me – ultimately – to my current vocation.
The first concerned a regrettable capital gains tax liability that arose following the sale of the property that my then-accountant unwittingly lumbered me with.
My first intimation about any potential tax liability was when I received a completely unanticipated (and most unwelcome) payment request from HM Revenue and Customs for £20,000. I was understandably peeved: I had plans for that money!
So, I bought a couple of books about property investment taxes and I studied them back-to-front in an effort to find some way out of my predicament.
I learnt that the reason people generally don’t pay tax when they sell their homes is due to a dispensation known as principal private residence relief that exempts any increase in value during the owner’s occupation of the property as their home.
However, in my case, I hadn’t occupied the property throughout the entirety of my brief ownership period: I had let the place out and had lived with my father. My only occupation was for a couple of months before and after the place was let out.
Back to the drawing board: head down, more reading. I found out that there is an extension to this exemption that can deem a property as occupied by the owner if the vacant period is bookended by periods of actual occupation. Excellent! I had my answer. Now I just had to gather proof of occupation.
Utility bills can be great supporting documentation (though it is does happen that a landlord pays the utilities in exchange for a higher rent). On the other hand, bank statements are perfect as evidence of occupation since it’s very unlikely a landlord will register their bank account to an address occupied by a third party.
I submitted my letter of appeal with its supporting documentation to HM Revenue & Customs and waited...
Success! The appeal was accepted, and the liability is reassessed to £nil.
I enjoyed the win, and the affair piqued my interest in tax and tax law, but it still didn’t register as something I wanted to pursue as a vocation. It took another painful event to establish me in my current profession.
Fast forward seven years…
I was at this point twenty-five years old and the ‘owner’ of 2 properties – encumbered with large, interest-only mortgages. I paid the debts using my credit cards. I saw myself as a professional property investor, and I had no other regular employment.
I lived in a flat that I had recently refurbished – using more credit card debt. My second property, which had previously been let out, was now vacant, and I was in the process of refurbishing with a view to sell – once again, relying on my credit cards.
It was my plan to sell the investment property, and then use the profit to pay off the credit cards and invest the balance as a deposit to buy two more properties: this was during the golden age of self-certification mortgages.
I was halfway through the refurbishment project when the recession of hit.
For me, as for many, this was a catastrophe. In the end, it took me five years to sell the properties to settle my debts -- realising a loss on both -- and I didn’t even possess the financial acumen to bank the capital losses for possible future use.
Wasting my mother’s legacy hurts; I realise now that I lacked the emotional maturity to handle a significant inheritance when I received one at such a tender age.
By this time, at thirty years of age (and working as a personal trainer), I had little to my name other than a new and more-developed appreciation of money.
My mistakes were now plain to me: the sum I had inherited had afforded me the means to take risks that were reckless and never likely to pay off. Had safeguards been in place or had I ceded control of the property to someone else, my unhampered ability to carry out my plans would have been curtailed and I would still have some of my mother’s legacy.
It is at thirty years of age, with a clear understanding of my reasons for wanting to help others preserve family wealth, that I began my journey into private client taxation, specifically as an inheritance tax advisor.