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Finance (No. 2) Bill

As I have said, setting up a trust does not provide inheritance tax advantages. People set up trusts in order to look after their families. Rather than clobbering all flexible trusts, why not retain the current, long-established rules for trust taxation, which have worked well, but provide that if a spouse’s life interest terminates during their lifetime and the assets pass to a continuing flexible trust, then it automatically gives rise to a chargeable transfer, in which case the potentially exempt transfer regime does not apply? That would achieve the result that the Revenue wants more effectively, and it would do so without inflicting the collateral damage of infringing on people’s freedom to provide prudently for the future of their families in the way in which they want to and of requiring 1 million wills to be rewritten. We are prepared to work with the Government and expert groups to draft a targeted amendment along those lines.