Budget 2006 - Budget update 

Budget Update reference HMRC Correspondence Below is the body of correspondence we have received in relation to 'reversions'. It would appear that HMRC, as with POAT, except that reversions being a 'carve out' are held in a bare trust for the benefit of the Settlor. Therefore NO exit charges will apply to any reversions under legacy, in addition any reversion that have taken place, prior to a 10 year anniversary, will NOT form part of the 10 year anniversary charge calculation! This gives a significant scope for planning. At the meeting between ABI and HMRC on Monday 8th May 2006, it was confirmed by HMRC that the following are the IHT consequences of creating a Discounted Gift Trust on or after 22 March 2006, where the gifted benefits are subject to flexible IIP trusts:- As previously, the value of the gift is the loss to the Settlor's estate. This is the amount invested less the open market value of the Settlor's right to receive his withdrawals. The payment of the regular withdrawals will not give rise to an exit charge, as they are paid to the Settlor under the bare trust to which he is entitled and which is not settled property. The 10 year periodic charge will be based on the value of the settled property at that time. This is the value of the bond less the then open market value of the Settlor's right to receive his withdrawals