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Wide-ranging tax shake-up feared in Green Budget

The Government is expected to deliver a major shake-up of capital gains tax, inheritance tax and higher-rate tax relief on pensions in next week&#39s Green Budget.

The consultative document to be outlined by Chancellor Gordon Brown is likely to have radical implications for best advice given by IFAs.

The proposals will form the basis of the next Budget but Brown is unlikely to backdate changes to the date of the Green Budget. Industry experts predict this will spark a rush by IFAs to take advantage of the current rules.

Brown is understood to be aiming for a clampdown on inheritance-tax avoidance. Many IFAs and life offices fear that potentially exempt transfers will be ditched.

Pets allow a gift to be made during the donor&#39s lifetime which is exempt from IHT if the donor lives a further seven years. Married couples could also be barred from making gifts to each other.

Higher-rate tax relief on pension contributions could also face the axe under the Green Budget&#39s proposals. IFAs are concerned that this will reduce the attractiveness of pension schemes further following Brown&#39s decision to scrap tax credits on dividends in his last Budget.

Charlwood Leigh director Nick Barker says: "I cannot see how he can abolish higher-rate relief. It would make pensions even less attractive. Higher-rate relief is a good incentive to bring many people into pensions."

Capital gains tax could also face an overhaul with a new two-tier regime being introduced. Autif believes this could penalise short-term investments such as Oeics and unit trusts with a higher rate of tax.

Scottish Equitable technical sales manager Richard Leeson says: "The moves will alter the way that IFAs advise high-net-worth individuals. There must be a consultation process."

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