The Budget

After the announcement of the transferable IHT nil rate band and the flat rate capital gains tax in the pre-Budget report, Mr Darling’s Budget statement on 12 March will inevitably leave trusts and estates practitioners with a sense of anticlimax. Both measures may be seen as bringing a measure of simplification into the tax system, not least in the practical application of the rules. Whilst many may mourn the passing of business asset taper relief, it cannot be denied that the calculations could be extremely complex where part of a gain would qualify for taper relief at the business asset rate, and part at the non-business rate. Trustees, in particular, may have had to consider the problems of the practical application of para 3 of Sched A1 TCGA 1992 in the case of trust property let to a farming or commercial tenant, which will have been regarded as a non-business asset until April 2000, or April 2004, depending upon whether the tenant was an unquoted trading company, or an individual trader or partnership of individuals, as a result of the statutory definition of ‘business asset’ being changed. In general, it is likely that most assets invested in, by trustees, will have been regarded as non-business assets for CGT purposes, so that the 18% rate of tax will represent an improvement of the best that could be achieved under the tapering regime, and without the need to hold property for a length of time. For personal representatives, the availability of the 18% rate of tax, without having had to hold assets being disposed of in the course of administering the estate for a lengthy period will be welcome.