IHT Compliance Burden Reduced

HM Revenue and Customs (HMRC) have issued new draft regulations which are intended to reduce the number of reports which need to be made for Inheritance Tax (IHT) purposes. This move follows the passing of the Finance Act 2006, which restricted the extent to which lifetime transfers into trust qualify as Potentially Exempt Transfers (PETs) and extended the categories of settlement that are liable to charge as a Relevant Property Trust (RPT).

 

The problem arose because Schedule 20 of the Finance Act 2006 meant that more transactions involving trusts would have to be reported to HMRC. The Act required taxpayers to deliver an account to HMRC where an individual makes a transfer during their lifetime which does not qualify as a PET or where a chargeable event arises in connection with a RPT. In many of these cases, the reporting requirement is not accompanied by a requirement to pay IHT, so HMRC intend to extend the rules that excuse taxpayers from delivering returns for certain transfers where there is no IHT to pay.

 

The draft regulations apply to excepted transfers and excepted settlements and are intended to reduce greatly the number of occasions when a report has to be made to HMRC. The intention is that the new regulations will be effective for chargeable events that have arisen from 6 April 2007 onwards.

 

The IHT 'nil-band'  threshold was increased on 6 April 2008 from £300,000 to £312,000.

 

We can advise you on all matters relating to IHT and family wealth preservation.