IHT – gifts of woodlands

It is a cliché that the only certainties in life are death and taxation. IHT is by no means the first tax to combine the two. It was preceded by Capital Transfer Tax (CTT) which in its turn replaced Estate Duty. It might be thought that, nearly 40 years after Estate Duty was replaced by CTT, its provision would no longer be relevant. Unfortunately this is not quite the case. One thing that all three taxes had and have in common is relief intended to encourage the growing of trees, by enabling the tax that, on general principles, would have been charged on the owner’s death to be deferred until the trees were felled or sold. However, because of differences in the basic structure of the taxes and in particular the treatment of lifetime gifts an anomaly arose when the Potentially Exempt Transfer was introduced by the Finance Act 1986. The intention, it seems was to ensure that lifetime gifts of woodlands, where payment of outstanding Estate Duty had not been triggered, would remain chargeable transfers (as they would have been for the purposes of CTT which was charged on all lifetime gifts). The legislation, in paragraph 46 of Sch 19 Finance Act 1966 went too far.