Government is all ears as the battle over trusts begins
With the finance bill tabled, the battle over Gordon Brown's controversial clampdown on trusts will now begin
Dave Hartnett, the director-general of HM Revenue & Customs, has said
that the government is, finally, ‘in listening mode’ on the issue. And with
scores of advisers suggesting there are fundamental problems with the proposed
rules, the scene is set for some frantic lobbying.
One major question people will be asking is: how can HMRC and the profession
have such widely differing views on the situation?
HMRC says only 20,000 people are affected by the change. The Society of Trust
and Estate Practitioners says a million wills must be rewritten.
Many have insisted that life policies will be affected by the move as well.
Revenue insiders dispute that, saying the details of the finance bill have
resolved the life industry’s concerns.
It is likely, say some advisers, that the vulnerable will be affected.
Mike Warburton, senior tax partner at Grant Thornton, says for instance that
if, as the life industry advises, you insure your life at up to ten times
salary, you only need to be earning £28,000 to be affected.
It’s worth pointing out that you receive the child tax credit if you are
earning that figure. Others still claim that the impact on life policies will
impact in an anomalous fashion.
A life policy would be valued more highly at the relevant ten year
anniversaries where the IHT charge kicks in if you were very ill, but not if you
were hale and hearty.
Are these affected?
HMRC officials say that whoever is offering up these scenarios should simply
‘look at the finance bill,’ the implication being, of course, that these people
must be wrong.
They cannot both be right, it might be pointed out.