UK Insurers Angered By Government's Targeting Of Gift And Loan Trusts

by Philip Morton, Investors Offshore.com

03 September 2004

The Association of British Insurers is meeting with the Inland Revenue to discuss the recent revelation that gift and loan trusts are not, as was previously assumed, exempt from the government's crackdown on inheritance tax (IHT) 'loopholes'.

Gift and loan trusts are insurance vehicles which ensure that any returns generated by the capital (which is not itself tax free) can be inherited free of IHT. The person who provides the capital can meanwhile draw it out again in the form of regular instalments over a 20 year period.

In his most recent budget, Chancellor Gordon Brown announced that he would be bringing in laws to prevent people from continuing to benefit from assets that had been given away for tax purposes. However, the insurance industry was reassured at the time to learn that gift and loan trusts were unlikely to be affected.

Although some UK insurers have suspended the sale of such products whilst the ABI talks with the government are taking place, speaking to the Telegraph regarding the Inland Revenue's seeming change of heart, Skipton Financial Services technical sales manager Patrick O' Leary suggested that it is entirely possible that the tax authority will reverse its latest interpretation of the rules, observing that:

"It's nothing more than a technicality, after all."

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