IHT transfers and tax rates

In spite of the promises and now enactment, of the legislation for the enhanced nil rate band, lifetime planning to make mitigate the future IHT liabilities is likely to remain important to clients. In the Briefing on p6, there is a discussion of the various types of ‘transfer’, and the possible implications of them. While much of it may at first seem to be rather basic and ‘old hat’, it did seem to the Editor that it might be useful to revise a number of the old capital transfer tax concepts. The politicians of 20 years ago grandly claimed to be abolishing capital transfer tax and certainly the concept of the potentially exempt transfer (PET), and the zombie-like resurrection of the gift with reservation of benefit from estate duty changed the planning opportunities and pitfalls. However, in legislative terms, the IHT Act of 1984 contains a great deal of the old capital transfer tax, especially in the definition of the tax base in terms of the ‘transfer of value’. Given the terms of the legislation, it is not surprising that the Special Commissioner found in favour of the taxpayer in Nelson Dance Family Trustees v HMRC (2008) SpC 682 (noted on p3 of the June issue of Trusts and Estates). Within the capital transfer tax regime, with its emphasis on the ‘transferor based’ nature of capital transfer tax, the result would have been seen as a foregone conclusion. Indeed, given how little the legislation governing business and agricultural property reliefs was altered when the Capital Transfer Tax Act 1984 was renamed the Inheritance Tax 1984 Act 1984, the Editor initially wondered by the case had ever proceeded to an appeal.