Brown Expected To Renew Attack On IHT Planning

by Robert Lee, Tax-News.com, London

28 November 2006

Next month's pre-Budget report is likely to see Chancellor of the Exchequer Gordon Brown further tightening the screws on inheritance tax planning, according to accounting firm KPMG.

David Kilshaw, head of private client advisory at KPMG notes that Brown has a track record of tightening the IHT net in his pre-budget and Budget speeches, and this year is likely to be no exception.

“The Chancellor has given himself a platform for change," Kilshaw observed.

"He could increase greatly the reach of inheritance tax while appearing only to make minor adjustments. For example, the rate at which trusts are taxed could be revised; now that most trusts are subject to tax every ten years, the maximum rate could be increased from 6% to 12%," he predicted.

The rules relating to 'Potentially Exempt Transfers' may also be reviewed, said Kilshaw.

“Currently it is possible to give away assets with no charge to Inheritance Tax provided that the donor survives for seven years. This period could be extended to 10 years or the relief simply abolished," he stated.

Meanwhile, changes introduced in the Budget 2006 mean that business property relief is increasingly important, noted Kilshaw, and he warned that there is a "real risk" that the Chancellor could impose a monetary limit on certain assets currently exempt from IHT, such as shares in unquoted trading companies.

The Treasury raised GBP3.3 billion from inheritance tax in 2005/06, but KPMG predicts that measures already put in place will mean that the Chancellor will "comfortably" beat last year's figure.

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