Said Mr Riches: "Overall, this is a 'steady as she goes' Pre-budget Report for personal tax and those concerned with the personal taxation industry. The Government is continuing to target very specific tax avoidance schemes as part of its general policy commitment to clamp down on tax avoidance. There is nothing in this Pre-Budget statement that will be a great surprise to those in the industry - with possible exception of the dramatic about turn on self directed pensions. It is unfortunate that the Government felt that such significant restrictions were necessary to this innovative pension reform."

Mr Riches also commented on changes to the 'pre-owned assets' regime, inheritance tax 'death-bed' planning, and proposals for a new tax on planning gains.

"The Government has announced that the scope of the pre-owned assets regime will be widened (so as to apply from December 5), to prevent its provisions being circumvented by 'reverter to settlor' trusts. The Government introduced a pre-owned assets regime on 6 April 2005, imposing an income tax charge upon former owners of property who continue to enjoy a benefit from that (or another) property free of charge or at low cost. The primary purpose of these rules was to counter inheritance tax planning schemes involving the family home, although they do have wider application.

"Clients able to unwind their schemes will generally escape pre-owned assets charges, but will also suffer inheritance tax by reference to the value of the property in question upon their death (the benefit of the scheme being undone) unless further planning is possible. Some commentators had suggested that it may be possible to unwind certain planning structures but then implement further arrangements using 'reverter to settlor' trusts, the idea being to escape the pre-owned assets regime in a way that would still secure the desired inheritance tax advantages. The Government's Pre-Budget Statement will ensure that any such arrangements will not circumvent the provisions of the pre-owned assets regime.

As regards inheritance tax, Mr Riches said: "The Pre-Budget Statement introduced measures targeted at UK domiciled persons, whose worldwide assets are generally subject to inheritance tax, buying an interest as a beneficiary in in a trust made by non domiciled persons. Such trusts were attractive to UK domiciles because they were exempt from inheritance tax to the extent that the assets in the trust were located outside the UK. There have been some marketing schemes encouraging this practice because there was no requirement of ownership of the interest in the trust for a minimum period unlike the rules for business assets such as AIM shares where the exemption only applies after 2 years ownership. So it was possible literally to engage in "death bed" tax planning.

"The Government is now putting a stop to such schemes by announcing that where an interest in one of these trusts is bought after 5 December 2005 the trust will no longer be exempt from inheritance tax."

Owen Clutton, of STEP's Technical Committee said: "From what one can see it may be the whole trust and not only the interest bought that will be liable to inheritance tax. So it may be quite a far reaching change."

Mr Riches continued: "As widely predicted in the press prior to the Pre-Budget Report, the Government is contemplating the introduction of a windfall tax on property development. This "planning-gain supplement" is the subject of a consultation paper released to coincide with the Pre-Budget Statement. Broadly, proposals are as follows: the planning gain will be calculated as the difference between the value of the land in its original use and its value with full planning permission at the time permission is granted; the supplement will be a percentage of the planning gain; the supplement will not be payable until development is actually commenced; both residential and commercial land will be subject to the supplement; there will be a threshold below which the supplement will not apply - this will encompass home improvements and may be extended to small developments; and the supplement will not be introduced prior to 2008.

"In the context of a Chancellor who has a mantra of tax simplification, the addition of a new tax that, in many ways, can be seen as a throw back to the old days of Development Land Tax is a slightly unusual move. However, this can perhaps be taken as an indication that the existing legislation designed to tax development land gains is not considered to be as effective as HMRC would like."