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Standard Life: Govt IHT disclosure plans will hit advisers

Standard Life is warning Government plans to end grandfathering for old inheritance tax trusts could hit the “bread and butter” work of advisers.

Under the Disclosure of Tax Avoidance Scheme rules, promoters of schemes which include a transfer of value relating to an inheritance and seek to reduce the value of that transfer or avoid IHT must disclose the scheme to HMRC. Clients then have to provide details using a tax return – even if no tax is due.

However, HMRC is consulting on removing a grandfathering rule that means any scheme widely used before 2011 does not need to meet these conditions.

Trusts currently grandfathered include discounted gift trusts, pilot trusts, excluded property trusts, insurance policy trusts and the transfer of pension death benefits into a relevant property trust.

Standard Life family finance expert Julie Hutchison says: “If grandfathering is removed these schemes will become part of the regime and it is absolutely bread and butter for financial planners, especially if they are working with older clients looking to manage who inherits their money.

“I would dearly love a conversation with the Revenue so we can better understand their intended target and consider from a Dotas perspective what the most effective way of strengthening it is. This is very broad and I am not sure it will deliver the target approach they say they want to take.”

Technical Connection joint managing director Tony Wickenden says HMRC has already made it clear reliefs explicitly allowed by legislation will not be caught. 

He says: “HMRC explicitly say in the consultation, for example, that if you invest in business property relief qualifying stock like AIM shares that is specifically permitted because it is in legislation.

“They will definitely be open to these conversations, whether they agree with everything is a different matter.”


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