It may not be a surprise that it would happen eventually, but IFAs have been surprised the governmen...
It may not be a surprise that it would happen eventually, but IFAs have been surprised the government's decision to close WITH IMMEDIATE EFFECT the inheritance tax (IHT) loophole which allows any person making gifts or lifetime donations to reserve or receive any material benefits for themselves.
One Millfield IFA who contacted IFAonline says the decision to close the loophole immediately is a real concern, because he had several clients lined up next week to use that legal loophole.
A decision to close the "gifts with reservation" loophole for Potentially Exempt Transfers follows the Inland's Revenue's third unsuccessful attempt to win its legal argument in the case of CIR v Eversden.
The estate of Eversden has successfully avoided the full extent of the IHT charge on the death of the donor because the Court of Appeal agreed that the special rules applied by the Revenue under section 102 and Schedule 20 of the Finance Act 1986 do not work when gifts by a married person are routed through a trust for their spouse.
From today onwards, however, a donor may no longer give a possession to their spouse and still hold an interest in it unless they are prepared to bear the consequences on the benefactor's IHT bill.
This effectively means that any gift made for IHT purposes must be seen to be a gift, and not a tax loophole which allows the donor to still hold onto or use their property, whatever it may be, so they no longer possess it.
Revenue officials believe the estimated yield from IHT will be around £2.4bn in 2003-2004, so changes after the Eversden will boost that considerably.
Consistency and compliance vs. slower reaction time
Search for replacement to begin imminently
60+ £300bn ISA savings
Has technology moved on?
Total funds on list rise from 26 to 58