Brown accused of U-turn over trusts and inheritance tax

The Conservatives have accused Gordon Brown of a U-turn after the Government tabled a series of last-minute amendments to the Finance Bill to answer concerns about inheritance tax and trusts.

The amendments followed a campaign by accountants, solicitors and opposition parties against new taxes announced by the Chancellor in his March Budget. At the time, Mr Brown said he was changing the rules to close tax avoidance loopholes, but tax experts warned the new regime would affect millions of people.

Yesterday, the Government moved to quash two of the most controversial aspects of the proposed rule changes with amendments to the Finance Bill clauses on property left to spouses and assets left to children.

Accountants had feared that under the original proposals, wives would have to pay tax on property left to them in trust by their husbands, despite a basic rule that people should never pay inheritance tax on assets inherited from spouses.

Mr Brown's proposals would also have prevented parents setting up trusts that did not allow children to inherit assets before they reached the age of 25. Under his Budget rules, any trust that children could not access at 18 would have faced punitive tax charges, but the Government has abandoned that suggestion.

Theresa Villiers, the Conservatives' shadow Chief Secretary to the Treasury, said: "This is a major climbdown by Gordon Brown who had proposed penal new inheritance tax charges on almost all trusts."

John Whiting, the head of personal tax at PricewaterhouseCoopers, which had campaigned against the Chancellor's proposals, welcomed yesterday's amendments but said questions remained about the new rules.

"This is recognition that the Government got it wrong in the first place, but we still have concerns," he said.

In particular, the life insurance industry remains anxious that any life insurance policy set up in trust could be subject to inheritance tax. The Government has repeatedly said this would not be the case but has yet to table regulations that would exempt such policies.

A spokesman for the Treasury said yesterday's amendments had been introduced to answer questions raised during the consultation period on the Finance Bill. "There has been absolutely no change in policy," he insisted. "These were technical amendments made after listening to people's concerns."