Newsletter - Aut/Wint 05/06

Properties in Trust Liable to Income Tax

Under changes to inheritance tax announced in the budget, homes which have been gifted into trust and which continue to provide benefits to the donor will now be subject to an income tax charge based on the potential rental value. Whilst primarily targeting those who are seeking to avoid IHT, these measures are also likely to impact those who have made such gifts to avoid paying for residential and nursing care. The Government has announced a period of grace for trusts which contravene the new rules to be dismantled and the position returned to the status quo.

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