.png)
.png)
Legislation will be introduced in Finance Bill 2010 to set the limit of the inheritance tax nil rate band for the tax year 2010/11 at the current level of £325,000.
It was intended in the Finance Act 2007 to increase the threshold to £350,000 for transfers made (or deemed to be made) on or after 6 April 2010.
Legislation will also be introduced in Finance Bill 2010 to counter two tax avoidance schemes that have been designed to avoid IHT charges on property in trusts.
Currently, where property is transferred into a trust, a 20% IHT charge normally applies on the value of the transfer above the nil rate band. A further 20% charge applies if the person transferring the property dies within seven years.
HMRC has become aware of avoidance schemes designed to avoid these charges on transfers into a trust.
One scheme reduces the value on which the charge applies by exploiting the rules that relate to future interests in trusts.
Another scheme involves purchasing an interest in a trust rather than putting funds directly into the trust, so avoiding the charges on property transferred into trust.
This measure will apply where a person transfers property into a trust in which he (or his spouse or civil partner) retains a future interest or where a person purchases a future interest in a trust.
It provides that there will be a chargeable event for inheritance tax purposes when the future interest comes to an end and the person becomes entitled to an actual interest under the trust.
If that future interest is given away before the person becomes entitled to an actual interest, it may be immediately chargeable to inheritance tax.
It also applies where a person purchases an interest in possession in a trust at full value.
Such an interest will be treated as part of the purchaser’s estate for inheritance tax purposes. If the interest comes to an end during the purchaser’s lifetime, there may be an immediate charge to inheritance tax.
