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Savers could pay IHT while they are still living

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11/08/2014
Savers could be forced to pay inheritance tax while they are still alive, under a new drive against tax avoidance planned by the government.

Ministers want to stop wealthy people benefiting from complicated schemes that allow them to dramatically reduce the amount they will owe after their death, the Telegraph reports.

Under plans put out for consultation, HM Revenue & Customs would have powers to subject people minimising inheritance tax to “accelerated payment” laws, meaning they would be forced to pay up front if officials suspect them of using new schemes to avoid tax.

Experts have warned that under the rules, taxpayers will be treated as “guilty until proven innocent”.

Ministers are concerned that growing numbers of people are setting up trusts to shield their estates from inheritance tax.

These are established to effectively remove assets from their owners’ estates while they are alive so that, on their death, tax does not apply.

Different assets can be held in a trust, including property, financial assets such as shares and insurance policies that will pay out on death.

Unlike outright gifts, trusts allow donors to retain control of the assets so that their adult children or other beneficiaries cannot immediately spend the money.

The new rules will only apply to trusts the taxman believes are being used to avoid tax. However, there will be concerns that innocent people could be investigated and made to pay large sums before they are able to defend themselves.

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