HMRC ponders inheritance tax reform

Monday 11 August 2014

People suspected of trying to avoid inheritance tax could be forced to pay the charge before they die, under changes being considered by the Government.

Measures put out for consultation suggest HM Revenue & Customs could demand "accelerated payment" where individuals are using potentially illegal avoidance schemes.

The plans come amid concern that growing numbers are using trusts to shield their estates from inheritance tax.

Effectively the vehicles remove assets from their owners' estates while they are alive, but unlike outright gifts, allow them to keep control.

Inheritance tax is levied at a rate of 40% on the value of an estate above the £325,000 threshold - with married couples able to combine their allowances.

The Tories pledged to raise the threshold from £325,000 to £1 million at the last election, but the policy was blocked by the Liberal Democrats.

Stuart Phillips, of tax planning firm the Private Office, told the Daily Telegraph: "The concern is that the Revenue takes a highly aggressive stance, just like with the film schemes for which celebrities have been under scrutiny, and terrifies families who have been engaging in legitimate tax planning that has been used for many years.

"I'm apprehensive that large-scale action could have unintended consequences."

An HMRC spokesman said: "We are seeking views on tackling Inheritance Tax avoidance schemes. This is an ongoing consultation and no final decisions have yet been taken. The proposals in the consultation paper will only affect a small minority of wealthy individuals who actively seek to avoid Inheritance Tax. Couples would still be able to leave up to £650,000 tax free to benefit their children or grandchildren."