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Government clamps down on inheritance tax avoidance

Government clamps down on inheritance tax avoidance

Families will no longer be able to avoid inheritance tax by placing their properties into trust under new disclosure requirements which are set to come into force next April.

At present, people cannot avoid paying IHT if they give away a property but continue to live in it. However, some schemes work around this rule by putting the property in a trust and naming children as the beneficiaries.

As from next April, these schemes will have to be disclosed to HMRC and as a result they could be shut down. It is thought that families who have already taken advantage of such schemes will not be affected.

The Financial Times claims that property worth tens of millions of pounds could have been sheltered in trust schemes already.

The government is keen to clamp down on any type of tax avoidance and the new requirement is one of the tools it intends to use to counter arrangements it feels are against the “spirit of the law”.

John Whiting from the CIoT has welcomed the announcement but Neal Todd, a senior partner at Berwin Leighton Paisner law firm, said the government’s new tax measures were a hash and will do nothing to restore confidence in the UK’s taxation system.

Inheritance tax is levied at a rate of 40% on the value left in an estate over £325,000. Couples can transfer their tax-free amount to their partner so that the survivor has a potential tax-free allowance of £650,000.

Bequests and asset transfers to spouses are free of IHT and people can reduce the value of their estate by giving away £3,000 per year as well as smaller financial gifts.

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Image: Special Delivery (#100888) by mark sebastian

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