Excepted transfers and excepted settlements
Introduction
The 2006 Finance Act changed the inheritance tax rules for some kinds of trusts. This means that more transactions involving trusts have to be reported to HM Revenue and Customs. We have looked at the rules for these reports and concluded that they can be changed to reduce the number of reports that people have to make to us. We have also concluded that the rules can be changed to more precisely define the value of assets that are placed in trust when considering whether a report needs to be made.
Detail
Taxpayers have to deliver an account to HMRC where an individual makes a transfer during their lifetime which does not qualify as a potentially exempt transfer (PET) (very broadly a transfer other than to another individual or certain types of trust) or where a chargeable event arises in connection with a “relevant property” trust (RPT). The Finance Act 2006 (FA06) restricted the extent to which lifetime transfers into trust qualify as PETs and extended the categories of settlement that are liable to charge as a RPT.
Taxpayers are excused from delivering an account in qualifying circumstances which are set out in regulations. These are:
- The Inheritance Tax (Delivery of Accounts) (Excepted Transfers and Terminations) Regulations 2002 – for lifetime transfers, and
- The Inheritance Tax (Delivery of Accounts) (Excepted Settlements) Regulations 2002 – for RPTs,
We intend to revise and update these regulations to reflect the changes made by the FA06. An outline of our proposals for lifetime transfers and for RPTs, is available. Our proposals are intended to significantly reduce the number of taxpayers who would otherwise have to deliver an account. We intend that the regulations will apply to all transfers into trusts and RPT chargeable events occurring on or after 6 April 2007.
We invite comments about these proposals by the end of August, although it would be helpful to have them sooner than that if possible. Comments should be sent to:
Tony Key
HMRC Inheritance Tax
Ferrers House
PO Box 38
Castle Meadow Road
Nottingham
NG1 2BB
(or DX 701201 Nottingham 4)
or email Tony Key
