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The Law Society - Conveyancing




Developments in Inheritance Tax Planning

Since the introduction of the Government’s Transferrable Nil Rate Band (‘NRB’) Allowance for spouses in October 2007 there has been much speculation on the likelihood of significant rises in the threshold amount, currently fixed at £325,000 per individual and frozen at this level until the end of the tax year 2014-15. The 2012 Budget included an announcement that the indexation of the Inheritance Tax NRB is to be switched from the retail prices index to the Consumer Prices Index (‘CPI’), signalling the likely end of these significant rises in threshold amount.

The changes are scheduled to begin from the tax year 2015/16, using the CPI increase for the year to September 2014 (rounded up to the nearest £1,000).

Inheritance Tax planners should ensure that they make full use of the permitted tax allowances and gifting options – such as annual gifts and other regular gifting out of income provisions – as well as the significant benefit offered by the spousal exemptions and transferrable allowance. A consultation is also underway for an increase in the IHT exemption for gifts to non-domiciled spouses, which has already been criticised as being contrary to EU law principles.

The latest consultation aimed at extending the General Anti-Avoidance Rule to provide for a General Anti-Abuse Rule to all ‘main direct taxes’ from 2013 further emphasises the government’s intention to deter “contrived and artificial schemes” and to protect “the centre ground of responsible tax planning”.(Report by Graham Aaronson QC (11 November 2011)).

We advise all clients to seek our advice on matters of tax planning and to ensure that the key documentation required by HMRC in order to take advantage of such schemes is carefully preserved for future use.

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