The Government has announced it will be closing down schemes which have been used to avoid inheritance tax through the use of trusts.
It says it is also examining wider solutions to the issue of IHT avoidance through trusts.
Prudential tax and trusts manager Gerry Brown says the announcement will not have serious repercussions on the life insurance industry as the schemes were not mainstream.
He says: “These are very specific schemes, they were probably bespoke schemes for individuals, they were not mass- marketed. One life office did offer a version but, to my mind, did not do anything particularly offensive. This Government seems to operate on a loophole-by-loophole basis instead of reforming IHT, standing back and saying how do we want the IHT system to operate, what reliefs should be available and what way should the tax be structured.”
On the issue of IHT avoidance through trusts, Standard Life head of estate planning Julie Hutchison says: “What will these wider solutions be? Is the Government contemplating a more general anti-avoidance provision? Or are other schemes within its sights?
“Early dialogue between HMRC and professional bodies would be beneficial so that any solutions are well thought through and we avoid a repeat of the events of 2006.”
Skandia head of tax planning Colin Jelley says: “I think the measures will make the more esoteric schemes less attractive and increase the relative importance of discounted gift trusts and loan trusts which is good news for financial advisers as these are the areas they are very well versed in.”
Hutchison says the Chancellor’s announcement that the nil- rate band for IHT will be frozen at £325,000 until 2011 was “a drop in the ocean”.
She says: “The fact that the NRB will not increase to £350,000 did not quite feel like a tangible loss, since it related to a future event rather than the removal of something currently enjoyed.”