Gordon Brown has decided to clamp down on the use of trusts, which individuals used to preserve wealth for their offspring, while benefiting from preferential tax treatment.
Inheritance tax could be avoided by placing a house in a double trust home-loan scheme and then passing it on to offspring while continuing to live in the house.
‘Everybody seems to go pale when we mention it,’ said Anita Monteith, tax consultant at the ICAEW.
She said that clients ‘come to us for advice and expect us to know’ and that the first thing they will say on learning of the clampdowns is ‘well you said it was alright, what are you going to do to get me out of it?’
Accountants have until April 2005 to ‘descramble’ the schemes. ‘This comes as no real surprise, but it does mean that tax planners will now have to think very carefully when advising their clients,’ said Tim Cripps, partner at Moore Stephens.
Other policy changes include a clampdown on gift aid for charities, VAT on assigned debt and a huge boost to the VAT strategy that it hopes will recover £2bn by 2005-06. It will employ a further 450 staff over the next two years to help it.
Paymaster general, Dawn Primarolo, said: ‘The measures announced demonstrate the government’s determination to tackle tax avoid-ance and create a fair environment for all.’
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