Budget Summary 2004

Budget 2004

Introduction

Personal Income Tax

Tax Credits

National Insurance Contributions

Employees

Pensioners

Savings

Trusts

Capital Gains Tax

Inheritance Tax

Stamp Duty / Stamp Duty Land Tax

Corporation Tax

Business Tax

Value Added Tax

Other Measures

Tax Tables

National Insurance

Inheritance Tax

Rates

The rates of IHT remain 40% on death and 20% for lifetime chargeable transfers. The nil rate band rises from £255,000 to £263,000 on 6 April 2004.

Pre-owned assets

In December, the Chancellor announced the intention to introduce a measure to close down an IHT loophole. Where someone gives away an asset (e.g. a house) but continues to enjoy it (e.g. by living in it), it is supposed to stay part of their IHT chargeable estate because of a rule called "gifts with reservation of benefit" (GWROB). A number of schemes have been designed to get around the GWROB rule, and the Revenue want to deny the benefit of these schemes.

The proposal was to introduce, from 6 April 2005, an income tax charge on the current use of an asset where that asset was formerly owned by the user. The income tax charge would be similar to the "benefit in kind" that an employee might have on the use of an asset provided by an employer.

This has led to a great deal of controversy and protest, because it will apply to arrangements which were established in the past, when there was no indication that such a tax charge would be introduced. The Revenue have responded that it is not retrospective, in that it is the current use after April 2005 that will be taxed, not the transfer in the past; but many such arrangements cannot now be undone.

The Chancellor has confirmed that this measure will take effect from 6 April 2005, but has introduced a number of exemptions and relieving measures to deal with some of the complaints against it. In particular, where a person has set up a structure which cannot be undone, it will be possible to elect back into the IHT charge in order to avoid the new income tax liability.

Tax Trap

Do you have the use of any assets you used to own?

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