Following the 2004 Finance Act and its new legislation on pre-owned assets, the financial services industry is worried about the effects on home reversion schemes.
The new rules on pre-owned assets seek to tax people that have sold assets to avoid tax, but who still enjoy the benefit of the asset. Further clarification has been called for from the Treasury.
Our View
In reality, this new legislation could apply to people that sell a portion of their home for a cash lump sum but remain in it for the rest of their lives. However, the Treasury has made a statement that says: "this legislation is designed to tackle people using contrived complex schemes drawn up by expensive tax advisers to avoid tax.
There is no question of any change in the tax treatment of ordinary transactions or legitimate tax planning".
Clear as mud and very worrying!