Product category:
Protection
News Release from: Standard Life Bank | Subject: Protection
Edited by the Insidemoneytalk Editorial
Team on 16 July 2007
Standard Life welcomes HMRC consultation
on new IHT reporting regulations
Standard Life has today welcomed the start of a consultation period by HM Revenue and Customs (HMRC) on new rules to simplify Inheritance Tax (IHT) reporting requirements.
After Budget 2006 and the change to the IHT treatment of gifts to trusts, many more taxpayers have found themselves caught by regulations requiring them to file certain forms to report their gift to a trust, even when no IHT is due The paperwork generally involves 2 forms: an IHT100 of 8 pages and an IHT100a of 4 pages
This article was originally published on Insidemoneytalk on 23 Feb 2007 at 8.00am (UK)
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This compliance requirement applies to chargeable transfers (CT).
Prior to 22 March 2006 the main example of such a gift was a gift to a discretionary trust.
Life offices generally did not make use of such trusts at that time.
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From 22 March 2006 onwards however gifts to interest in possession trusts (known as flexible trusts in the financial services sector) had their IHT treatment changed from being a potentially exempt transfer (PET) to being a CT and so became caught by this new layer of compliance.
This affected Gift Plans and Discounted Gift Plans.
The result was that gifts over £10,000 to most life office trusts required an IHT100 form, even when no IHT was due, a situation which was unsatisfactory for taxpayers.
In addition, IHT100 forms might be required at the ten year anniversary of the trust, again even if no IHT was due at that time.
The proposed new rules outlined on HMRCs website mean that for tax year 2007/08, any person making a gift which is a CT of less than £210,000 will not need to file an IHT100 form, unless they have made other CTs in the last 7 years which take them over that threshold in total.
This figure is a big increase on the current limit of £10,000.
The compliance requirements at ten year anniversaries are also being reduced in line with this.
For Discounted Gift Plans, special rules are to apply which mean that the cheque value, rather than the discounted gift value, is the key test as to whether a form is required.
The consultation period lasts until the end of August.
Commenting on this development, Julie Hutchison, Estate Planning Specialist at Standard Life Assurance Limited said : "I welcome this open approach to developing the new regulations".
"The proposed retrospective nature of these rules is a positive step since taxpayers who have made gifts to trusts from 6th April 2007 onwards will be able to take advantage of the new rules when they are finalised".
"The future method of increasing the reporting limit of £210,000 by reference to the future nil rate band increases means the reporting limit will not become out-of-date so quickly since increases will happen automatically each year".
"This consultation period represents progress and I look forward to the change in the regulations coming into effect".
"Standard Life will be responding to the consultation and liaising with the ABI in that process.".
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