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Govt issues call for evidence on deeds of variation ‘abuse’

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The Government has launched an open consultation into deeds of variation for tax purposes.

In the March Budget the Government announced it would review the use of DoV for tax purposes.

It is now calling for evidence on how often and in which circumstances DoV are used to reduce tax.

The Government says it wants to ensure the rules are not being abused, and will consider whether any changes should be made.

A DoV allows a beneficiary of a will or an intestacy to re-direct part or all of the estate they have received to another person.

If made within two years of death a DoV can result in a change to the amount of inheritance tax or capital gains tax due.

The tax consequences of a DoV normally follow those that apply to a gift.

However, subject to meeting certain conditions the parties to a DoV can elect for its terms to be treated for IHT and CGT purposes as if they had been part of the deceased’s will.

The deadline for responses is 7 October.

Association of Chartered Certified Accountants head of taxation Chas Roy-Chowdhury says: “The Government committed to reviewing DoV after coming under pressure from the Public accounts committee to stop what it considered tax avoidance.

“But DoV just puts assets where they would have ended up if the deceased had had the benefit of hindsight. That might result in a better tax outcome, but it should not generally be considered sophisticated tax avoidance.”

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