A new method for calculating discounts on investment gift schemes has been launched by the HM Revenue and Customs. This will standardise the way in which the schemes are operated, removing the need for life insurance companies to make the calculations themselves.
The differences in the schemes were more apparent when investment monies were being paid out on death, highlighting the difference in discounts quoted by providers. The new calculations will be effective from 1 June.
Our view
This is a complex area. Discounted Gift schemes are clever inheritance tax planning investments used to reduce the value left in trust for your family whilst leaving an income available to you. In short, there are providers who may have been pushing the boundaries too far in how much they offered as a ‘discount’ based upon life expectancy. HM Revenue and Customs are obviously happy with such inheritance tax planning trusts, they just wish to limit the amount potentially taken away from being chargeable for inheritance tax.