A number of opposition amendments intended to limit the retrospective effect of these rules were rejected during the Committee Stage of the passage of the Finance Bill on Tuesday and Thursday of this week and, as a result, it is now almost inevitable that many individuals who have given away assets to their children in the past as part of legitimate Inheritance Tax planning strategies will now face an Income Tax charge from April 2005.
Ian Maston, Director of Estate Planning at WJB Chiltern says:
“The minutes of the Committee Stage make very depressing reading. The government has conceded that it would be wrong to impose an Inheritance Tax charge now on people who have legitimately taken steps to avoid that tax but, very cynically, they argue that is not wrong to impose an Income Tax charge instead.
Moreover, the government has identified certain Inheritance Tax planning in the past as ‘innocent’ and provided an exemption from the new tax for ‘innocent’ tax planners. Those they have now identified as ‘guilty’ are caught however, with the government acting as judge and jury many years after the event to impose the tax as a sort of punishment. This sort of arbitrary justice is contrary to the spirit of the rule of law and, for all their special pleading, it reflects very badly on the government.
Individuals now have until 6th April 2005 to consider how they might respond to these new rules and, given the complexity of the provisions, it is not going to be an easy process for individuals to identify whether they are affected and if so what they should do.
