'Pay Before You Die' Inheritance Tax Plan

People suspected of trying to avoid inheritance tax could have to pay before they die under proposals being considered by ministers.

HM Revenue & Customs could demand "accelerated payment" where savers are using potentially illegal avoidance schemes.

The measures - at the consultation stage - are a response to concern that growing numbers of people are using trusts to shield their estates from inheritance tax.

But Stuart Phillips, of tax planning firm the Private Office, said the policy could have "unintended consequences".

HMRC says the proposals will only affect a small minority of wealthy people

"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 told The Daily Telegraph.

"I'm apprehensive that large-scale action could have unintended consequences."

Inheritance tax is levied at 40% on the value of an estate above the £325,000 threshold. Married couples can combine their allowances.

The Tories pledged to raise the threshold from £325,000 to £1m at the last election, but the policy was blocked by the Liberal Democrats.

A HMRC spokesman said: "We are seeking views on tackling inheritance tax avoidance schemes. This is an ongoing consultation and no final decisions have yet been taken.

"The proposals in the consultation paper will only affect a small minority of wealthy individuals who actively seek to avoid inheritance tax.

"Couples would still be able to leave up to £650,000 tax free to benefit their children or grandchildren."

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