Budget news

Gordon Brown presented his tenth Budget on Wednesday 22 March 2006. While there was little news on personal tax rates and allowances, there was surprising news that self assessment taxpayers can expect to have to file their returns earlier in 2008.

The Chancellor did announce further moves on tax avoidance, although the measures did not go as far as some commentators predicted.

Two significant surprises stood out the most on Budget Day.

An attack on interest in possession and accumulation and maintenance trusts

Lifetime transfers into accumulation and maintenance trusts or interest in possession trusts have always been exempt from inheritance tax (IHT) if the settlor lived for seven years following a transfer of assets to the trust. Such trusts are also not subject to the periodic or exit charges suffered by other trusts.

Legislation has been proposed to make transfers into these types of trusts immediately chargeable to IHT.

The changes came out of the blue! It is not clear why the government felt this change was necessary but it has serious consequences for IHT planning.

Trusts created prior to 22 March 2006 are subject to a transitional regime, which may allow them to escape future charges with appropriate planning.

Please talk to us if you have concerns over the changes to existing trusts.

Get ready to file your tax return by September!

A review of HMRC online filing services has been published. The key recommendations are to:

Whilst self assessment filing dates may be changed, payment dates will remain as 31 January and 31 July each year for the time being.

Some individuals may struggle to comply with the 30 September deadline and will, therefore, be forced to file online.