Budget 2015: IHT review provides opportunity for Miliband jibe

In what appeared to be a below-the-belt poke at the leader of the opposition, Ed Miliband, chancellor George Osborne announced plans in Wednesday's Budget to tighten up on inheritance tax (IHT) avoidance through a review of the use of deeds of variation.

Miliband was accused by the Conservatives of sidestepping inheritance tax in February, after he allegedly made use of a deed of variation on his father's will in order to put part of the family home into his and his brother's names.

The review - which could result in a clampdown on the use of deeds of variation, or even their abolition - forms part of a wide-ranging clampdown on tax avoidance and evasion set to raise an additional £3.1 billion for Treasury coffers, also revealed in the Budget.


A deed of variation may be used to change a will after an individual's death, enabling the beneficiaries of the estate to alter the way it is distributed. For example, if there was no provision made in the will for a dependent who needed support, the family could agree to allocate assets to help them.

Tina Riches, national tax partner at Smith & Williamson, explains that deeds of variation can also be used to minimise IHT. But she says they are much less widely used nowadays, since the introduction of the transferable nil rate band, which makes it much easier for married couples to organise their assets tax efficiently.

Dawn Register, partner, tax dispute resolution, BDO, says: 'The politicians seem to have muddied the water here by categorising this as tax avoidance; in fact the ability to use a deed of variation is clearly set out in current tax law.

'A deed of variation allows beneficiaries to alter a will after death so that, for example, part of the inheritance is re-directed to someone else. Currently a deed can be made within two years of death, and all beneficiaries under the will must agree to the variation.

'If abolished, this could have the unfortunate consequence of stopping inheritances being diverted to charities. Deeds of variations are frequently used to minimise inheritance tax by re-directing assets to UK registered charities.'

However, Riches maintains that the review is unlikely to abolish deeds of variation because they have an important role to play in protecting vulnerable beneficiaries. 'It's more likely that it will stop people benefiting from any reduction in IHT as a result of reallocating the assets,' she says.

Julie Hutchison, savings and eax expert at Standard Life, recommends that anyone dealing with a family member's estate and thinking about its distribution should act now, in case deeds of variation become less flexible later in the year.

She adds: 'Many people don't keep their will up-to-date, or don't have one at all, and a deed of variation is a very useful tool to support families in tidying-up what happens after a loved one dies. A deed of variation can result in less inheritance tax being due, and this is clearly one of the factors driving the consultation announced today.'

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