Pre-Budget Report – Inheritance Tax Avoidance
New legislation is to be introduced effective from 9 December 2009 to counter two inheritance tax avoidance schemes designed to avoid inheritance tax charges on transfers into a trust.
The new legislation will affect:
- transfers into a trust where the settlor retains a future interest, or where a future interest in a trust is purchasedand
- interests purchased in trusts
One scheme reduces the value on which the inheritance tax charge applies by exploiting the rules that relate to future interests in trusts whilst the second scheme involves purchasing an interest in a trust rather than putting funds directly into the trust and avoids the inheritance tax charges on property transferred into trust.