HMRC confirm IHT will not hit children's trusts

Solicitors and insurers have welcomed ultimate confirmation from HM Revenue & Customs (HMRC) that gifts in trusts left to minors will not be subject to inheritance tax (IHT) charges.

Convoluted changes to the law last year inspired fears that gifts to under-18s might be taxed differently than gifts to adults.

It was believed that gifts to children might be subject to an immediate IHT levy of 20 per cent if the value of the donation exceeded the donor's unused nil band rate. It was also feared that gifted property would attract an ongoing six per cent levy every ten years.

Parents and grandparents across Britain and Northern Ireland can rest assured that outright gifts to youngsters will be tax-free provided that the donor is still alive seven years on. Of course, as with gifts to adults, if the donor does not survive that period, charges will be incurred.

The announcement will bring relief to numerous financial institutions, which had been lobbying HMRC to clarify the situation regarding children's trusts.

Emma Chamberlain, chairwoman of The Chartered Institute of Taxation's Capital Taxes Sub-Committee, said in a press release: "HMRC have given a clear response to the questions that have been raised and so those who are happy to make outright gifts to children can do so without incurring any additional IHT penalty."

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