Mark McLaughlin looks at the pre-owned assets tax charge, and its connection with inheritance tax planning.
Planning to mitigate a particular tax can sometimes have an unforeseen knock-on effect for other taxes.
A nasty surprise?
For example, ‘pre-owned assets tax’ (POAT) is an income tax charge, which was introduced to block certain ‘unacceptable’ inheritance tax (IHT) planning arrangements. The POAT rules (in FA 2004, Sch 15) broadly charge income tax on benefits received by former owners of three categories of asset (i.e., land, chattels or intangibles in a settlement), where certain conditions are satisfied.
Consequently, if an individual has (say) disposed of land, or has contributed towards the acquisition of the land but occupies it, they are potentially liable to POAT. The amount chargeable to income tax is broadly the
