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Inheritance Tax


Previous announcements stated that from 6th April 2007 the Inheritance Tax ‘Nil Rate Band’ will increase to £300,000, increasing again to £312,000 from April 2008 and £325,000 from April 2009. The 2007 Budget announces a further increase to £350,000 from April 2010.

Trusts


The budget introduces corrections to last years Trust changes. These include from 6th April 2006 Trustees only paying tax on the increase in share price when a company purchases it’s shares back from the Trust, rather than suffering tax on the whole proceeds.

Beneficiaries will no longer receive a benefit for notional tax credits on chargeable event gains on certain life assurance policies previously given in error as an oversight in the legislation.

Anti-avoidance measures

In the Government’s continued clamp down on tax avoidance, further measures were included in and just before the Budget. These included stopping the practice of buying and selling companies to secure a tax advantage through getting access to their capital losses and gains. The provisions previously introduced to stop the sale of lessor companies to avoid tax have been extended to include partnerships and consortia. Rules regarding the use of Employee Benefit Trusts have been tightened. Regulations previously introduced to stop Companies creating artificial losses to save tax were extended to individuals from 6th December 2006.

Measures may catch loss making partnerships

Prior to the budget a further measure was announced to stop tax schemes that used partnerships, especially Limited Liability Partnerships (LLP) in which losses were created and set against other income to reclaim tax. However the provisions may also affect unsuspecting partnerships not involved in the schemes, where losses are incurred and there is a non-active partner.