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The Implications of Income Tax Charge on Estate Planning
By Janine Byrne

Overview

In the Pre-Budget Report of December 2003 the Chancellor Gordon Brown announced proposals to levy an Income Tax charge from 6th April 2005 in those circumstances where the transferor of an asset retains and interest or continues to benefit from that asset. In the instance of real property, the 'benefit' envisaged is the transferor continuing to reside in the property he/she has allegedly given away.

How the Charge Applies

The Government refer to such assets as 'pre-owned assets' and, broadly speaking, its intention is to tax the 'annual value' of such assets as a benefit-in-kind on the former owner still enjoying the use of the asset. The annual value on which the charge is based will be the open-market rental for a property or a fixed percentage of the capital value of most other assets to which the new charge applies. Any amounts which the transferor pays for the use of the asset - rent for example - will be deducted from the annual value in arriving at the taxable benefit.


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17 May 2005 by LawKit
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