Following the Finance Act 2006, advisers are looking to maximise all avenues to reduce the impact of the changes introduced, especially those relating to inheritance tax (IHT).

The legislation surrounding trusts (Schedule 20 Finance Act 2006) means it is essential to consider the order in which gifts into trusts are made when advising your clients on inheritance tax (IHT) solutions. The order in which gifts are made will dictate the future taxes applicable to the trusts created, as the following example demonstrates.

The Finance Act 2006 made changes to the inheritance tax (IHT) treatment of interest in possession (IIP) trusts and accumulation and maintenance (A&M) trusts.

Pre-Owned Assets Tax (POAT) was introduced by Schedule 15 of the Finance Act 2004. It imposed an annual income tax charge from 6 April 2005 in circumstances where taxpayers have successfully circumvented the inheritance tax (IHT) gifts with reservation rules, yet are still able to benefit from the asset transferred.