Time to Review Inheritance Tax Planning Before the Chancellor Moves the Goalposts?

The Chancellor has announced a ‘fiscal event’ just short of a Budget for early July 2020. This is unexpected but is clearly due to the current Coronavirus crisis.

The emergency measures introduced by the Government to assist UK workers during the crisis is said to be costing the Treasury around £14 billion each month, and will increase public sector borrowing this tax year to £300 billion, according to current estimates. The Chancellor will doubtless be looking for ways to reduce the deficit.

Speculation is rife that the government will take the opportunity to announce some tax increases that would be politically challenging under normal circumstances. Many of these are issues that receive attention every year but there could be changes to Inheritance Tax, Capital Gains Tax and Stamp Duty Land Tax, and perhaps even yet another raid on pensions.

At present, there are very generous reliefs from inheritance tax available for farming and business assets. These can be as much as 100% and there have been fears in the past that a Chancellor could easily reduce that maximum rate down to 75% or even 50%.

The ‘7 year rule’ relating to lifetime gifts or ‘Potentially Exempt Transfers’ has been in existence for decades and there is a possibility of changes to these rules also. A Republic of Ireland style system, where beneficiaries are charged on gifts and inheritances which they receive, has been mooted in the past.

Further, rules relating to ‘Deeds of Variation’, which allow beneficiaries of estates to redirect their inheritances in a tax efficient manner within two years of a death, may be altered or time limits changed.

Whilst time is obviously tight, anyone who is considering making a lifetime gift, setting up a trust or availing of a deed of variation may want to look at putting those arrangements in place before July.

At Cleaver Fulton Rankin our Private Client team is here to help you navigate a way through these complex issues.

This article has been produced for general information purposes and further advice should be sought from a professional advisor. Please contact our Private Client team at Cleaver Fulton Rankin for further advice or information.