The rates of IHT remain 40% on death and 20% for lifetime chargeable
transfers. The nil rate band rises from £255,000 to £263,000
on 6 April 2004.
In December, the Chancellor announced the intention to introduce
a measure to close down an IHT loophole. Where someone gives away
an asset (e.g. a house) but continues to enjoy it (e.g. by living
in it), it is supposed to stay part of their IHT chargeable estate
because of a rule called "gifts with reservation of benefit"
(GWROB). A number of schemes have been designed to get around the
GWROB rule, and the Revenue want to deny the benefit of these schemes.
The proposal was to introduce, from 6 April 2005, an income tax
charge on the current use of an asset where that asset was formerly
owned by the user. The income tax charge would be similar to the
"benefit in kind" that an employee might have on the use
of an asset provided by an employer.
This has led to a great deal of controversy and protest, because
it will apply to arrangements which were established in the past,
when there was no indication that such a tax charge would be introduced.
The Revenue have responded that it is not retrospective, in that
it is the current use after April 2005 that will be taxed, not the
transfer in the past; but many such arrangements cannot now be undone.
The Chancellor has confirmed that this measure will take effect
from 6 April 2005, but has introduced a number of exemptions and
relieving measures to deal with some of the complaints against it.
In particular, where a person has set up a structure which cannot
be undone, it will be possible to elect back into the IHT charge
in order to avoid the new income tax liability.
Do you have the use of any assets you used to own?