Accelerated payments could be applied to inheritance tax
Accelerate payments could be applied to trusts in order to circumvent inheritance tax avoidance
PEOPLE SUSPECTED of attempting to avoid inheritance tax could be forced to pay up before they die under HM Revenue & Customs plans to curb the practice.
The proposals, included in the tax accelerated payments consulation, would require people seeking to minimise their liabilities to pay up front if officials suspect them of using new schemes to avoid tax.
Ministers are concerned that growing numbers of people are setting up trusts to shield their estates from inheritance tax, the Telegraph reports. Typically, assets from owners’ estates are placed in these trusts while they are alive so that, upon their death, tax does not apply. Assets sheltered may include property and financial products including shares and insurance policies that pay out on death.
Unlike typical gifts, trusts allow donors to retain control of the assets so that their adult children or other beneficiaries cannot immediately spend the money. The rules will only apply to trusts HMRC believes are being used to avoid tax, the government maintains.
However, there are concerns that innocent people could be investigated and made to pay large sums before they are able to defend themselves.
Earlier this month, it emerged the yield from inheritance tax had hit a six-year high, with families charged £3.4bn in death duties last year, an increase from £3.1bn in the previous 12 months.
The current threshold for payment is £325,000, although the Conservatives are considering raising it to £1m. The current rate is 40%.
A spokesman for HMRC said “very small numbers” of wealthy people would be affected, with the focus on those who had taken “deliberate” action to avoid tax.