Year End Tax Review 2008 Contents New Year's resolutions Investment limits Borrowings and tax Family tax planning Mr and Mrs Give generously and save tax Jam today, or jam tomorrow? Tax payback - tax credits Bringing it back home Children's pensions? A matter of trust Children's savings? All change for gains Second homes Portfolio gains Capital ideas Tax-free perks Employee pensions and NIC Pension policies Employee cars and fuel Business tax Pay rise for the other half? Company or trade Two jobs = too much NIC Should VAT be flat? VAT and cash Inheritance tax One careful owner

One careful owner For some years, a number of plans have been available to reduce the impact of inheritance tax, particularly on the value of houses. The idea has been to take the house out of the owner's assets chargeable to IHT, but still to allow occupation. Several of these plans have been held to be effective by the courts, and the Revenue have had to close the stable door each time after many horses (or houses) have bolted. On 6 April 2005, a new and highly complicated set of rules came into effect to try to remove the advantages of these plans. Instead of charging IHT on the value of the house when the occupier dies, they instead want to charge income tax each year on the benefit of living in it. One of the ways to avoid the income tax charge will be to choose to pay IHT instead - in effect, the horse bolts back into the stable. The scope of these rules is very wide. If you have ever put into effect an IHT-saving plan which involved giving something away but continuing to enjoy it, you should take advice about whether you are affected. You may also be caught if you have given money to someone else so they can buy an asset which you enjoy - and it is not just houses that are caught, but also other assets and investments in trusts. It is hard to see how the Revenue can police all the different possible situations which are caught, but they are likely to be aware of the most obvious - the house plans which were specifically intended to avoid IHT. The nastiest possibility is that the problem goes unnoticed for many years and then has to be addressed when someone has died, adding to the complications of dealing with an estate. If you think that you might be subject to these rules, you should take advice promptly to see if you need to report income, or take action to avoid having to do so. Action Point! Do you have free use of something you used to own or helped to buy?