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Magic or tricks of the mind?

In a Budget for families and the future, the Chancellor announced the most far-reaching changes to the personal tax regime since coming to office 10 years ago.

These reforms ranged from a substantial reworking of rates and thresholds for income tax to some reversals of previous changes to corporation tax.

Chancellor Gordon Brown continued to play the role of a master magician, pulling rabbits out of the hat, yet the overall effect seems to be broadly neutral.

Unfortunately, he did not use this opportunity to reverse the trend towards complication of the tax system. His approach to reform reinforces the value that advisers can add to their clients by sharing expertise.

On inheritance tax, what was not said was more important than what was.

It was disappointing that there was no sign of the expected consultation on increasing the reporting thresholds for 2007-08. This development needs to be accelerated to ease the compliance burden of the trust changes introduced last year, for advisers, clients and HM Revenue & Customs.

Also noticeable by its absence was any announcement of final guidance on the treatment of gifts to bare trusts for minor children. According to advice given by HMRC, such gifts give rise to entry, 10-yearly periodic and exit charges and are not potentially-exempt transfers.

This uncertainty must be resolved urgently as taxpayers may have to report such gifts from today.

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