The Government's announcement it is to examine wider solutions to the issue of IHT avoidance through trusts has been described as an ‘ominous statement' by Standard Life head of estate planning Julie Hutchison.
Few details were released with the Pre-Budget Report but commentators believe trouble could be looming for trusts.
“It is urgent the government makes clear what it means by ‘wider solutions’ and what it feels is the problem so that any solutions are appropriate,” Hutchison says.
“I would encourage early dialogue between professional bodies and the Treasury so that widely drafted rules don’t catch out things that were not the original target.”
Darling has already pledged to close down some schemes which have been used to avoid IHT through the use of trusts.
“There are a few artificial avoidance schemes around as a consequence of the 2006 IHT changes. Closing these schemes will undo some of the loopholes,” says Brown.
However, John Turton, director, advisory & financial solutions at Barclays Wealth, says this move is directed at a very niche market.
“This is aimed at the very ultras. Conventional high net worth individuals with £1m plus portfolios can make use of previous means and mechanisms such as annual allowances. For most it is business as usual,” he says.
Meanwhile, the Chancellor’s decision to freeze the inheritance tax threshold has also been branded a political move rather than a revenue-raising tactic.
Darling says the tax allowance will remain at £325,000 for individuals and at £650,000 for married couples and civil partners in 2010-11.
The threshold was due to rise from £325,000 for a single person to £350,000 from next year. Darling says fewer than 3% of estates will pay inheritance tax.
Darling says: “Before the financial crisis rocked the global economy, I enabled married couples to combine their inheritance tax allowances. And this will continue.
“I also said that allowances would rise to reflect inflation and the expected continued increase in house prices.
“But I do not believe that raising this allowance can be a priority, given the impact of the downturn on the country’s finances.”
Gerry Brown, tax and trusts manager at Prudential, says: “Freezing IHT is a political device rather than a tax raising device. It wasn’t totally unexpected.”
Andy Gadd, head of research at the Lighthouse Group, says the move is an attack on the Conservative’s IHT plans: “This is political expediency not sensible tax planning.”
"The Tories are expected to raise the IHT threshold to £1m if they win next year’s election."
Total funds on list rise from 26 to 58
What made financial headlines over the weekend?
Q2 net sales dropped almost 50%
‘Important to have an anchor’