Yesterday's clarification of changes to pre-owned assets taxation rules reveal many people already holding such trust arrangements will not be hit by Revenue reforms, according to analysis by Scottish Equitable.
Several significant changes were made to tax avoidance rules yesterday by the chancellor Gordon Brown, as part of this year's Budget.
That said, many of the tax avoidance loophole closures were previously announced or at least provided the clarification life offices required on different types of scheme use.
Until now, technical experts at life companies have been unable to clarify how exactly the new rules concerning the tax treatment of pre-owned assets should be applied, and who they will affect.
However, Margaret Jago, technical support manager at Scottish Equitable, says it is now clear any arrangements where assets are still held within the donor’s IHT estate – such as trusts for nil rate planning and probate trusts – will not be caught by the new rules.
Similar relaxation of distributor status funds mean anyone investing in distributor funds on non-life wrappers will pay capital gains tax (CGT) rather than income tax, says Jago.
However, this market now opens offshore investments such as distributor funds to a greater potential readership as such funds can now be held within portfolio bond tax wrappers, which can allow bonds can be switched within the wrapper and without any immediate tax liability to the individual.
At the same time, however, chancellor Gordon Brown yesterday announced changes which move the UK taxation system closer to that adopted in the US.Revenue documents reveal anyone using tax avoidance arrangements – and their promoters – will in future have to provide details of any such scheme and their involvement to the tax authorities, a move which suggests the Revenue is no longer trusting of individuals and instead assumes schemes are being abused by individuals.
It is a move which has not exactly upset life companies, says Jago, as most life offices avoid secrecy of concealment of any kind, but does tend to suggest the Revenue is now adopting a new approach to handle anyone abusing the taxation system.IFAonline
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