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MPs urge
action to curb avoidance of inheritance tax
Gordon Brown should consider widening his crackdown on tax avoidance to
cover schemes that offer thousands of homeowners ways to escape paying
inheritance tax, says an influential committee of MPs.
The disclosure regime that requires accountants, lawyers and other
advisers to tell HM Revenue & Customs about avoidance schemes should
also cover inheritance tax, the Commons Public Accounts Committee said
in a report published recently.
Its findings come as the Revenue is trying to calculate how much
inheritance tax goes unpaid and has moved to block one avoidance scheme
used by tens of thousands of homeowners.
The MPs say the Revenue has no measure of how much inheritance tax goes
uncollected and is drawing on US estimates to calculate the shortfall.
US tax officials put the shortfall at 13 per cent of receipts –
equivalent to £325m.
In their report, the MPs make a number of recommendations aimed at
improving the tax take and simplifying bureaucracy.
Insurers to go easy on gay questioning
Life assurers will no longer be able to ask male applicants questions
about their sexuality under new guidelines for the industry’s
underwriting of HIV risk which recently came into force.
Insurers have until now asked male applicants to disclose if they were
bisexual or homosexual to screen for HIV risk. But gay rights
campaigners called for an end to the practice, which resulted in gay men
having to take HIV tests even if they were celibate or in long-term
relationships.
Insurers should also have reworded their documents so that all
applicants, regardless of their sexuality, are asked if they have ever
been tested for HIV or if they have been exposed to the risk of HIV in
the last five years.
What these companies will now do is focus on behaviour rather than
sexuality.
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AIM enjoys
increased interest
More investors are looking towards the potential of companies listed
on the Alternative Investment Market (AIM) as a means of shielding them
from inheritance tax. The attraction is that AIM investment schemes
confer inheritance tax relief after just two years compared with the
seven years required for lifetime gifts.
Business property relief, as the IHT exemption is known, was introduced
in 1984 with unquoted company shares – including AIM and Ofex traded
stocks – added as a qualifying category in 1996.
Until now, many investors have been put off AIM shares because of the
volatility and vulnerability of small cap companies. These risk factors
remain but the growing number of AIM-listed stocks – just over 1,300
– and the increasing maturity and diversity of individual companies
have made the unquoted market more attractive.
Business property relief also allows investors to switch their holdings
around within their portfolio. They are not required to hold the same
stock for the entire two-year period.
Inheritance tax has become less of a ‘voluntary tax’ as thresholds
have failed to keep up with increases in the wealth held by individuals,
particularly property. AIM investments offer alternative solutions.
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