An industry body has welcomed the decision by HM Revenue & Customs (HMRC) to accept late elections to pay inheritance tax rather than a pre-owned asset tax (POAT).
The Chartered Institute of Taxation (CIOT) said that the changes to the system would be useful for people who found themselves inadvertently caught out by POAT even though they may not have intended to do any inheritance tax planning.
Emma Chamberlain, the chair of the CIOT's capital taxes sub-committee explained: "POAT is a complicated tax and people may not realise that they are caught by it. For example, it can apply if you sell a share in your house to a relative even though no inheritance tax is saved."
Introduced as part of the Finance Act 2004, the rules stated that income tax could be charged on any benefit that people derive from having free or low-cost enjoyment of assets which they formerly owned or provided the funds to purchase.
The measure was designed to stop people giving away their family home for inheritance tax purposes, but continuing to live there. However, the rules have since become extremely complex.
Now, HMRC has acted to simplify the system, which Ms Chamberlain said will help people, especially those on low incomes.
"Such people will now be able to elect late although it is likely that they will still need to elect within a reasonable time of becoming aware of the need to do so."
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