Government IHT proposals are 'frightening'
Government plans to introduce 'accelerated payment' laws that would force savers to pay inheritance tax (IHT) while they are still alive are "rather frightening", an independent financial adviser has said.
Under the new proposals, HMRC will be able to force people they suspect of tax avoidance to pay IHT up front while the courts decide whether the arrangements are legal.
However, experts have expressed concern that innocent taxpayers will fall foul of the new rules.
"The proposals are rather frightening," said Scott Gallacher, chartered financial planner at Leicester-based Rowley Turton IFA. "In Britain, unlike many other countries, trusts are firmly established as a legitimate planning vehicle rather than some shady tax avoidance thing.
"Trusts generally can't be used to avoid inheritance tax any more than simply gifting away the asset directly and surviving the seven years.
"Consequently, unless HMRC are planning on stopping the seven-year rule, people could simply gift the money directly," he continued.
The plans were published
on 31 July by HMRC in the document 'Strengthening the Tax Avoidance Disclosure Regimes'. The consultation runs until 23 October 2014.
|
David Watts is a partner at UK personal tax specialists Watts Woollett "Many transfers to trusts are already subject to the lifetime IHT rate of 20 per cent and most trusts are now subject to a ten-year anniversary lifetime inheritance tax charge of up to 6 per cent of assets within the trust.
"UK trusts also pay their own higher rate income tax and capital gains tax on assets held or sold within the trust. "HMRC have recently issued their third consultation on the simplification of the taxation of trusts which may remove some further trust tax benefits. It will be interesting to see overall where HMRC seek to draw the line in terms of what they believe is acceptable IHT and trust planning and from when, and how their proposals may interact with existing and future UK tax law. "Such proposals only add further complexity and uncertainty to the ultimate costs and benefits of legitimate longer-term inheritance tax planning. The sooner there is more clarity on this development the better." |
'Creates confusion'