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Where Taxpayers and Advisers Meet

Discounted Gift Trust

DF13
Posts:52
Joined:Wed Aug 06, 2008 3:09 pm

Postby DF13 » Tue Jun 01, 2004 3:12 am

Does anyone have any opinion whether or not the Inland Revenue intend to include discounted gift trust schemes within the pre-owned assets charge?

If so, roughly how might the charge the calculated?

Arnold Aaro
Posts:43
Joined:Wed Aug 06, 2008 3:11 pm

Postby Arnold Aaro » Mon Jun 28, 2004 1:01 pm

As far as I am aware, currently it is not affected by the Finance Act. I have good authority on this...read this:

Discounted gift trusts

The Inland Revenue confirmed that in cases where the settlor disposes of a life policy (or other intangible property) to a trust under which part of the trust fund is held absolutely and indefeasibly for himself and the balance of the trust fund on a settlement for others (and from which the settlor but not his spouse is excluded from benefit) then the new charge does not arise by virtue of paragraphs 8(1)(a) and (b).

They will regard the settlor´s entitlement as a bare trust and not settled property.

Implications

This means that the part of the fund representing the settlor´s entitlement to a stream of capital payments contingent on the settlor being alive on certain future dates will not count as part of the trust property. So provided the settlor is excluded from the other (gifted) part of the fund, which in most cases will be the case, then the pre-owned assets rules will not bite.

Consequently discounted gift schemes and retained interest trusts (where the settlor has a right to a lump of capital rather than a stream of capital payments) will not be subject to the pre-owned assets provisions. The Revenue reserve the right to change the rules if "abusive" schemes are marketed that manipulate this relief.


Hopefully this will not change when the act is finalised.

Feel free to e mail me,

arnold.aaron@zurichadvice.co.uk

Arnold Aaro
Posts:43
Joined:Wed Aug 06, 2008 3:11 pm

Postby Arnold Aaro » Mon Jun 28, 2004 3:43 pm

Woops - forgot to include my details:

Arnold Aaron
Financial Adviser
Zurich Advice Network
Tel: 0208 437 2500

[I advise extensively on Discount Gift Trusts, Inheritance Tax ingeneral and Investments]

Arnold Aaro
Posts:43
Joined:Wed Aug 06, 2008 3:11 pm

Postby Arnold Aaro » Tue Nov 09, 2004 7:13 am

I have now given a recent and updated response to this question at:

http://www.taxationweb.co.uk/forum/discuss.php?id=4090

In a nutshell it confirms that Discounted Gift Trusts are not affected by POAT.

Arnold Aaron
Financial Adviser
Zurich Advice Network
Tel: 0208 437 2500

[I advise extensively on Discount Gift Trusts, Inheritance Tax ingeneral and Investments]


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