The continual increase in tax complexity by a Chancellor who is an inveterate tinkerer will continue to drive demand by clients for tax and financial planning advice from IFAs.
The Chancellor has confirmed his intention to introduce a new retrospective income tax charge on the benefit that people get by having free enjoyment of assets they previously owned.
This is aimed principally at residential property schemes promoted by many solicitors but it was feared that it might apply to lump-sum insurance-based planning arrangements. How-ever, the Budget press notice confirms this fear is unfounded, “where the client's continuing claims are limited to particular retained benefits”, the structure used by many life office schemes.
The proposals for change to taxation of the income and gains of trusts move on to the next stage. The rate applicable to trusts will increase from 34 per cent to 40 per cent from 2004/05. The likely outcome of the consultation continues to be the introduction in 2005/06 of a basic-rate band of £500 – an amount that some bel-ieve may create more compliance costs than benefits – and an increase in the number of trusts where the settlor will be taxed on the income and gains of the trust.
These changes are likely to increase significantly the demand from trustees for insurance wrappers, issued by onshore and offshore life offices, given the tax-deferral opportunities inherent in these structures.