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ARTICLE · 23 MARCH 2005

Pre-owned Assets Tax

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The Finance Act 2004 introduced an income tax charge on what the Revenue press releases referred to as "pre-owned assets": the income tax is on income that does not exist; the assets do not necessarily need to be pre-owned. In general, commentary on the new tax has been hostile: pre-owned assets tax has been called, amongst other things, a ‘mongrel’ tax and a ‘wealth tax in disguise’.

United KingdomTax
Kelly Noel-Smith
Kelly Noel-Smith

Introduction

The Finance Act 2004 introduced an income tax charge on what the Revenue press releases referred to as "pre-owned assets": the income tax is on income that does not exist; the assets do not necessarily need to be pre-owned. In general, commentary on the new tax has been hostile: pre-owned assets tax has been called, amongst other things, a ‘mongrel’ tax and a ‘wealth tax in disguise’. It is perceived to be an attack on widely-marketed inheritance tax mitigation arrangements – Ingram, Eversden and the so-called ‘double trust’ schemes - which operate to allow individuals to live in what is effectively their principal residence, the capital value of which is removed from their estates. These schemes rely on successful potentially exempt transfers ("PETs") of property where the donor manages to retain an enjoyment of that property without falling foul of the reservation of benefit provisions.

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