Inheritance tax: 'Pay up before you die' plan to combat avoidance

Power would be used only when 'deliberate actions' had been taken

People could be forced to pay inheritance tax before they actually die, according to proposals being considered by the Government.

The move is designed to prevent wealthy people from designing schemes to avoid paying much of the tax.

According to the plan, which has been put out to consultation, HM Revenue & Customs (HMRC) officers would be able to ask for payment while people are still alive if they suspect this is happening.

A spokesman for HMRC told The Daily Telegraph that only “very small numbers” of wealthy individuals would be affected and the power would be used only when “deliberate” actions had been taken to avoid tax.

Trusts and schemes that “are used legitimately in many arrangements by the vast majority of people” would not be affected, the spokesman added.

However Stuart Phillips, of tax-planning company Private Office, said he was worried by the idea.

“The concern is that the Revenue takes a highly aggressive stance, just like with the film schemes for which celebrities have been under scrutiny, and terrifies families who have been engaging in legitimate tax planning that has been used for many years,” he said.

“I’m apprehensive that large-scale action could have unintended consequences.”

Inheritance tax of 40 per cent is paid on the value of an estate above the threshold of £325,000. Estate worth less than that are not taxed.

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