HM Revenue & Customs is planning to raise the threshold for reporting chargeable lifetime transfers which it is predicted could reduce advisers’ IHT compliance burden by 75 per cent.
The threshold at which CLTs made in any one year will need to be reported will be raised from £10,000 to £215,000 or from £40,000 to £255,000 over a 10-year period.
The £210,000 threshold will generally be applied to most trusts to determine whether a report is required at the 10-year anniversary.
HMRC is proposing an additional third test against which the reporting thresholds will be measured. This will be based on the value of the assets to be transferred.
It is proposed to reduce the cumulation period for reporting purposes from 10 to seven years, bringing it in line with the seven-year period for calculating IHT on previous gifts. HMRC expects the rules to come in retrospectively from April 6.
Skandia head of tax and financial planning Colin Jelley says: “If these changes go ahead as proposed, this will be excellent news for advisers and clients. The proposed reporting thresholds are far more appropriate to today’s market. I believe it could reduce the number of IHT reports that need to be made by as much as 75 per cent, which will significantly reduce compliance costs for advisers and their clients.”
Standard Life estate planning specialist Julie Hutchison says: “This consultation period represents progress and I look forward to the change in the regulations coming into effect.”