Succession: Rich parents rush to give away assets as tough tax rules loom

It is a great time to be a rich kid in Britain, according to the advisers, lawyers and accountants of wealthy families.

- Lauren Almeida

With rumours of a wealth tax swirling in Westminster, and tougher inheritance tax (IHT) rules looming in the new tax year, wealthy parents are starting to give away their assets and sign over parts of their businesses to their children – in some cases, decades sooner than they had planned.

John Spencer, the director of GPS Marine, a marine infrastructure specialist based in Rochester, Kent, is one of many entrepreneurs taking advantage of tax rules that allow wealth to be given away before death to reduce a possible IHT bill. Gifts made seven years before someone dies are not subject to IHT, while those given three to seven years before death are taxed on a sliding scale known as "taper relief". The rate reduces each year, falling from 32% to 8%.

It is one way of cushioning the loss of two major tax reliefs: business property relief (BPR) and agricultural property relief (APR). The changes prompted thousands of farmers from across the country to protest in London.

Big family enterprises, which previously did not have to pay any IHT when the business was handed to the next generation, will face tax of 20% on any value above £1m, starting from next April.

It means without any action Spencer's company, which is worth about £20m, could attract an IHT bill of as much as £4m. "I have split my shareholdings with my wife and we are starting to give away assets, £1m each to our sons," he says.

Spencer, 66, says he can no longer make big investment decisions without making a provision for IHT in cash, as the tax now poses "an ever present threat to the survival of the business".