Some of Burnham’s colleagues subsequently claimed these are his personal views and not a prelude to another policy U-turn. However, it is inconceivable that any statements made in an interview by the number two person at the Treasury are just a “personal” view.
The comments will be seen as flying a kite for the possibility of Gordon Brown pinching another Conservative policy following the pre-Budget report concession on inheritance tax, tax charge on non-domiciled workers who have been in the country at least seven years and the introduction of a flight levy from November 2009 although the Tories pinched this last policy from the LibDems.
One policy in the pre-Budget report which was not pinched from the Tories is already attracting considerable flack. I am referring to the capital gains tax changes, where a flat rate tax of 18 per cent is due to apply from April 6 next year, with account no longer being taken of how long the asset has been held and with indexation and taper relief being abolished. I have not seen any indication yet of whether the valuable lettings relief of £40,000 per person on a property which was once the main residence is also being abolished.
This change in the CGT rules is a response to the criticism of private equity paying too little tax. However, Alistair Darling has employed a sledgehammer to crack a nut and if this change is enacted as proposed, it will send an odd message as the effect is an 80 per cent tax increase for business assets held over two years but a 55 per cent tax reduction for a short-term gain by a 40 per cent taxpayer.
The IHT proposals will save married couples with combined assets between £300,000 and £600,000 who have not already adopted appropriate IHT planning the need to do so although those near the £600,000 limit will need to monitor the size of their net assets. However, those who have taken the trouble to engage in IHT planning, particularly if using a nil rate band trust, will have to reassess their position, probably resulting in the payment of more professional fees. Couples who were planning to use a deed of variation after the first death will no longer need to do this and will not incur any extra costs.
One question couples who have set up a nil rate band trust and have assets in excess of £1m should consider before dismantling the trust is the political landscape. With George Osborne’s pledge to increase the IHT limit to £1m likely to be one of the first Budget pol-icies to be implemented by a new Tory admin-istration, the nil rate band trust may again be useful after the next general election.
Ray Boulger is senior technical manager at John Charcol