Schedule 4
Finance Bill
12:30 pm
David Gauke (Shadow Minister, Treasury; South West Hertfordshire, Conservative)
I shall start with amendment No. 61. Traditionally, and in the majority of cases, an inheritance tax charge is triggered by the death of an individual. At that point, there will be a charge on the estate under section 4 of the Inheritance Tax Act 1984. However, there are other circumstances in which a charge may be triggered, such as in the event of a lifetime transfer—a potentially exempt transfer that turns out not to be exempt because it happens within seven years of the death. Let us consider circumstances in which person A makes a gift in, say, 2005, dies two years later and can no longer benefit from the provisions of potentially exempt transfers. In assessing the tax payable, it is necessary to look back at those gifts.
I should be grateful if the Minister confirmed my understanding of the arrangements. Is it the intention that the transferable nil-rate band will be available for both the estate on death and for any lifetime gifts? The Law Society has expressed concern that the drafting of the proposals is not as clear as it could be. I draw attention, in particular, to the provision that states:
“for the purposes of the charge to tax on the death of the survivor”.
It is possible to construe that as relating simply to the charge triggered by death in relation to the estate, not the lifetime transfer. I have acknowledged that such interest has been shown by the Law Society, and its proposed clarification when referring to the purposes of the charge to tax on the death of the survivor is to state
“or additional tax on or by reason of”
the death of the survivor, thus unambiguously incorporating the lifetime transfer. It would be unfair if the transferable nil-rate band should not extend to a gift made by the surviving spouse in his or her lifetime, and I do not believe that the Government intend that it should not.