HMRC have published details of proposals to change the scope of the existing IHT excepted transfer and excepted settlements regulations so that fewer returns will need to be submitted.
The Finance Act 2006 changed the inheritance tax (IHT) rules for some kinds of trusts, which in turn, means that more transactions involving trusts have to be reported to HMRC. In response to this increase in internal administration, HMRC have looked at the rules for these reports and concluded that they can be changed to reduce the number of reports that people have to make. A recent review has also concluded that the rules can be changed to more precisely define the value of assets that are placed in trust when considering whether a report needs to be made.
Taxpayers currently have to deliver an account to HMRC where an individual makes a transfer during their lifetime which does not qualify as a potentially exempt transfer (PET) (very broadly a transfer other than to another individual or certain types of trust) or where a chargeable event arises in connection with a “relevant property” trust (RPT). The Finance Act 2006 changes restricted the extent to which lifetime transfers into trust qualify as PETs and extended the categories of settlement that are liable to charge as a RPT.
Taxpayers are excused from delivering an account in qualifying circumstances which are set out in regulations. These are:
- The Inheritance Tax (Delivery of Accounts) (Excepted Transfers and Terminations) Regulations 2002 – for lifetime transfers, and
- The Inheritance Tax (Delivery of Accounts) (Excepted Settlements) Regulations 2002 – for RPTs,
HMRC intend to revise and update these regulations to reflect the changes made by the Finance Act 2006. The new proposals, if accepted, will apply to all transfers into trusts and RPT chargeable events occurring on or after 6 April 2007.
Comments about the proposals are invited by the end of August.
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