MARRIED COUPLES IN WALES WARNED TO SEEK ADVICE ON INHERITANCE TAX PROVISIONS

Married couples in Wales are being warned to seek expert advice when putting in place measures to reduce the amount of tax paid when they die following the startling outcome of an inheritance tax appeal case.

Tax experts fear that a decision by the Special Commissioners, the body which settles disputes between the Revenue and taxpayers, could lead to a clampdown on couples using commonplace measures to lower the amount of inheritance tax they pay.

The case involved an Oxfordshire couple who, like many thousands of married couples, had put in place one of the most common measures to reduce inheritance tax. They each owned half of their family home - their biggest asset - as tenants in common, and structured their wills to include nil rate band trusts with the balance going to the surviving spouse.

Whilst this tax break has to date always been seen as being available to both working and non-working spouses, in the recent judgement, the Special Commissioners said non-working spouses who did not contribute financially to building up a couple’s assets could not take advantage of this commonly used device.

Broomfield & Alexander director Mark Jones said the case could now set a precedent and lead to non-working spouses being penalised.

“Thousands of married couples in Wales become tenants in common of their family home so that they can pass some of their wealth out of their estate, IHT-free, when the first spouse dies, leaving less for the taxman to take when the second spouse dies,” he said.

“This decision could now affect all couples where one spouse works and the other doesn’t. It’s a shame that the Special Commissioners were not asked to consider what a non-working spouse brings to a family.

“Obviously the Revenue will be looking on a case by case basis, however we understand that people will be anxious to try to safeguard as much of their wealth as possible in light of this outcome.

“There are still options out there to ensure that couples aren’t hit by a hefty tax bill, and our advice is to make sure people look into all the options and get advice on what is best for their circumstances.”