After the revolution in the inheritance tax rules for gifts to trusts in the Budget earlier this year, there was happily no repeat of the bombshell for IHT in the preBudget report.
There were, however, some sma-ller shells which landed and which will affect estate planning.
Stand-alone pension term assurance is an IHT issue although at least there appears to be consultation before the 2007 Budget.
Death benefits paid out under pension term assurance are often held under a master trust so they are not subject to IHT when paid out at the trustees’ discretion.
Those who need “traditional” protection cover in the future may not now take the extra step of transferring that policy to a trust, making the proceeds liable to a potential IHT charge which would not have arisen with a PTA contract.
The pre-Budget report is also noted for its omissions. Where are the regulations to increase the reporting limits for the IHT100?
For many years, the limit has been £10,000 above which an IHT100 and IHT100a form are required to report a gift which is a chargeable lifetime transfer.
This low threshold is a joke, given the big numbers of people making gifts which qualify to be reported. It is interesting to note that Revenue and Customs had its own budget cut by 5 per cent by the Chancellor.
Will it have the resources to cope with all the IHT forms? It is high time that the new reporting limits were announced to end this pointless paper exercise for smaller CLTs.