Disclosure of Inheritance Tax (IHT) Schemes - Don’t Panic!

Since 2004, HMRC has slowly but surely been closing in on tax planning arrangements under the ‘DOTAS’ regime – Disclosure Of Tax Avoidance Schemes – to “ensure that everyone pays their fair share of tax”. They started with Income Tax, CGT, Corporation Tax, National Insurance and moved on to SDLT (Stamp Duty Land Tax). IHT was not covered as the POAT (pre-owned asset tax) regime introduced from 2005 tackled the main perceived problem of people gifting the family home to the children, and continuing to live there without triggering the “gift with reservation” rules. We looked at that in our March issue.

IHT planning put into place before 6 April 2011 does not have to be reported, but from that date a limited range of “schemes” which mitigate IHT will be reportable under the DOTAS regime. The rules are targeted at transfers of assets into lifetime Trusts which avoid the lifetime IHT charge at 20% when they exceed the nil rate band of £325,000.

Most routine IHT strategies are unaffected, and bespoke IHT planning for those who may have left it too late to gift and survive by seven or even two years, also remains available.