Standard Life welcomes 30-fold increase to IHT reporting limit

Standard Life has welcomed the publication of new IHT regulations which will greatly simplify the compliance and reporting involved for many lifetime gifts.

The new rules were issued on 6 March 2008 and will come into force on 6 April 2008, with an effective start date of 6 April 2007.

Commenting on the new regulations, Julie Hutchison, Estate Planning Specialist with UK Financial Services, Standard Life said : “I am delighted with the retrospectivity in these new rules, which means people who have made gifts since 6 April 2007 will be able to take advantage of these new limits. These long-awaited regulations are the product of two rounds of consultation and are better as a result of that process. They are simpler and more consumer-friendly than the first draft from summer 2007.”

Under the old rules, chargeable transfers of over £10,000 had to be reported to HM Revenue & Customs (HMRC) on forms IHT100 and IHT100a, together adding up to 12 pages of compliance even if no tax was due. In the aftermath of Budget 2006, more types of lifetime gift qualified as a chargeable transfer instead of a PET (potentially exempt transfer) which meant both HMRC and those making gifts faced additional administrative burdens even when no IHT was due.

The new rules create 2 tests : if the gift is of cash or quoted shares, the reporting limit is the IHT threshold (ie. £300,000 for the current tax year). If however the gift is another type of asset, for example an investment bond, the reporting limit is 80% of the IHT threshold (ie. £240,000). Commenting on the levels selected in these new regulations, Julie continued : “Since Standard Life’s Discounted Gift Trust involves a gift of cash, people will benefit from the higher threshold test. I am also delighted to see the reporting threshold pegged to the nil rate band for IHT, which means the limit will automatically increase each year instead of being stuck at a fixed figure for years, which was the problem with the old rules.”

Tax and legislation are liable to change. The information provided here is based on Standard Life’s understanding of law and HM Revenue & Customs practice at the date of publication.