Passing of Finance Act provides IFA business opportunities

Now the Finance Act 2006 has received Royal Assent, advisers should embrace the new legislation which has created “significant business opportunities”.

Skandia claims now the Act has been passed into law, after receiving Royal Assent yesterday, advisers now have the clarity to enable them to advise their clients on the changes, particularly to Inheritance Tax (IHT) and trusts, and to work effectively with other professionals such as accountants and lawyers.

The company says research it has conducted reveals at least 500,000 clients belonging to advisers already have policies under trust with benefits which exceed the nil rate band for inheritance tax (IHT).

And it claims this figure does not include clients who have pre-Budget trusts which may exceed the IHT limit in the future because of investment growth, so it suggests the opportunity to offer advice in this area is huge, as the changes to legislation mean many of these clients could face IHT charges which didn’t exist when the trust was originally set up.

Skandia suggests particular areas of confusion for clients include those with pre-Budget trusts which already exceed the IHT limit, or will do so in the near future, as they could now face entry, exit and 10 year periodic charges if they change their policy.

It claims if a beneficiary of a trust is changed after 6 April 2008, apart from on their death, and the new beneficiary is not absolutely entitled to the benefits of the trust, then tax charges may apply. This could include if a beneficiary is added after the birth of a child, removed after a divorce or changed in the case of a change in business ownership.

And with so many people affected, Skandia says advisers have a significant opportunity to provide advice to make sure clients’ financial plans are suitable under the new legislation.

Colin Jelley, head of tax and financial planning at Skandia, says with half a million clients having trusts which already exceed the nil rate band, the government’s estimates of the new measures only affecting 20,000 people are wrong by a factor of at least 25.

And he adds the figure of 500,000 isn’t even taking into account the millions of other people who still need to spend time and money reviewing their trust and will arrangements to ensure they are not affected by the new legislation.

Jelley says: “Now the Finance Act has been passed, advisers have the clarity needed to ensure their clients are not unexpectedly caught out by this new stealth tax. The new rules have now been confirmed and this provides significant new business opportunities for advisers to review their clients’ trust arrangements and recommend changes where appropriate.”

If you have any comments you would like to add to this story or would like to speak to its author about a similar subject, telephone Nyree Stewart on 020 7968 4558 or email nyree.stewart@incisivemedia.com

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