HMRC accepted higher limits in principle but were not initially able to change the limits (£10,000 in a single year and £40,000 over a period of 10 years). HMRC subsequently published proposals on how they might extend the regulations that excused taxpayers from delivering accounts where there is no tax to pay in respect of chargeable transfers and “relevant property” trusts and invited comments on the proposals.
It has recently published revised regulations for reporting requirements. The new limits for not having to report a chargeable lifetime transfer made by an individual on or after April 6, 2007 are as follows:1: Where the value transferred is attributable to either cash or quoted shares or securities and that value, together with the transferor’s chargeable lifetime transfers in the previous seven years, does not exceed the threshold for IHT for the year in which the transfer was made (£300,000 for the 2007/08 tax year and £312,000 for the 2008/09 tax year).2: For other transfers where:
Thus the unreduced value transferred of £100,000 when added to the previous gift exceeds the IHT threshold available to the transferor and an account is therefore required.
The effect on insurance-linked productsIn their explanatory notes on the reporting requirements, HMRC has specifically dealt with insurance-linked products, including discounted gift schemes.
HMRC has advised that the value transferred will be attributable to cash if the transferor makes a transfer where he pays an amount in cash (or by cheque/bank transfer) and he then needs to take no further action to complete the transfer and cannot stop any further steps required to complete the transfer from taking place.
This will usually be the case when an insurance-linked product and related trust documentation are all completed at the same time and the product is placed in trust at outset.
However, where the transferor purchases an insurance-linked product, which he then subsequently places into trust, the non-cash 80 per cent limit will apply.
These changes should significantly reduce the number of taxpayers who have to deliver an account to HMRC and will be welcome news for advisers and clients.
Brian Murphy is financial planning manager at Axa Life