Pre-owned asset regulations - 'dismantling' relief from double charges
Forthcoming regulations to provide relief from possible double inheritance tax (IHT) charges in situations caught by the pre-owned assets provisions under Schedule 15 of the Finance Act 2004 are the closest measure to-date of any form of 'dismantling relief' for individuals caught out by retrospective changes to tax legislation, writes Nichola Ross Martin
The pre-owned assets tax (POT) charge has caught the main marketed IHT avoidance schemes. This involves reversionary leases, lease carve-outs and loan trusts/double trusts relating to the taxpayers main residence or valuable assets.
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Paul, I agree entirely. I was rather surprised at the
announcement which appears on one hand to be aimed at those unfortunate individuals who accidently got caught up in the POA rules, through no attempts at tax avoidance, and on the other so blatantly helps people trying to wriggle out of a situation that is totally of their own making.
Dismantling relief?
What nonsense - the taxpayer entered into an arrangement which was irrevocable and should have been warned that subsequent changes in legislation might make this course of action unattractive. Does the author really expect that the government will introduce a measure which will enable taxpayers who entered into (and I stress again) irrevocable transactions should be allowed to revoke them because it is no longer convenient?
Whilst I have no liking for the idea of the POAT its logic could be said to be immpecable and in line with the decision in the case of Cooper v Billingham - a person occupying property as a beneficiary of a settlement does derive a benefit from that occupation, in the same way that an employee occupying property provided by an employer derives a benefit. All the legislation does is provide a mechanism for taxing that benefit where the asset or the funds provided belonged previously to that beneficiary. In the days of the old Schedule A charge before 1963 there would have been an income tax liability on this occupation in any event.
The price to pay for irrevocable tax planning is that the law might change and reduce its attractiveness - I can see no justification for a proposition that under those circumstances the transaction could then be relieved by treating it as revocable.
The profession should be paying closer attention to those circumstances where such a liability might arise where it is not justified.