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JOHN WOOLLEY explains the current tax situation applying to lump sum inheritance tax schemes
KEY POINTS
- The application of the DOTAS rules to IHT schemes.
- Will the use of two well-known schemes need to be disclosed?
- Advantages and disadvantages of the discounted gift trust and the loan trust.
- The potential downsides of these plans must be considered at the outset.
In the pre-Budget report in December 2009 the then Labour Government announced the introduction of provisions (including draft legislation) to target two trust-based inheritance tax (IHT) schemes.
The main aim of these schemes was to transfer property into a relevant property settlement (e.g. a discretionary trust) at a much depressed value for IHT purposes.
Thus the 20% entry charge on transfers that exceeded the nil-rate band could be reduced or avoided. At the same time as announcing the anti-avoidance provisions the Government announced that it would consider wider solutions...
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