I am delighted that there appear to be no further attacks in the Budget on gifts into trust.
In fact, quite the reverse in that our Darling has extended the transitional period for changes to pre-March 2006 trusts until 5th October.
Combined with other recent announcements and rulings this leaves IFAs with clear messages to get across to their clients:
- Trust-based IHT plans can be used to genuinely reduce IHT liabilities.
- A recent ruling by Special Commissioners legitimised both the principles of such schemes and the effectiveness of discounts for all ages.
- The sooner each taxpayer starts the seven year clock the better – start today!
- Older taxpayers with large ISA portfolios should consider protecting them from IHT.
- Retrospective rules mean that plan transfers into trust from April 2007 and which are below the Nil Rate Band no longer have to be reported to HMRC.
All told, this represents a big green light to those taxpayers who, if they don’t get into action by utilising an effective mitigation strategy soonest, are likely to finish up unnecessarily paying IHT on their assets when they die.
Each year we are on the edge of our seats waiting to see if the Chancellor takes measures to block our plans. In spite of the introduction of Pre-Owned Asset Tax and changes to trusts this has not really happened so far. Moreover, the Government’s fear of action in the European Court of Human Rights now ensures that any such changes, if and when they occur, are most unlikely to have any retrospective impact. So anybody with assets well in excess of the current allowances, particularly those entering their grey phase, should waste no time in taking avoiding action at the soonest opportunity.
The big deterrent to entering mitigation plans in the past has been the lack of flexible access to assets once they have been gifted. This is no longer a major problem since plans can now combine discounts and flexible access.
Paul Wilcox is chairman and technical director of The WAY Group
The views expressed in this blog are the individual's own and not necessarily those of the company he represents.IFAonline
Outlook for income
Chris St John to take over £3bn UK Select Opps