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One careful owner

"Pre-owned" is usually sales-speak for "second-hand", perhaps a bit knocked about. It's about to get a new meaning in UK tax law. There have been a number of schemes aimed at removing the value of a person's house from their assets in order to reduce the inheritance tax when they die - but leaving them able to live in the house, either at a low rent or for nothing. The Revenue are now going after these schemes.

New rules are being introduced this year, to come into force on 6 April 2005, to charge income tax on the value of that reduced or nil rent - where someone still enjoys an asset which they used to own, and they don't pay a full market rate for that enjoyment. It's a nasty choice: IHT when you die, or income tax every year until you do. Most people would prefer to pay the tax later (or let their executors do so).

What is particularly alarming is that there is no exemption for arrangements that have already been set up. The idea of waiting until 2005 appears to be to give people a chance to unwind schemes they have entered into, if they want to do so. But some arrangements are legally binding, and will be hard to reverse.

The rules are not yet final, and there may be some concessions or other ways to reduce their effect. But if you have put in place one of these estate-reducing plans, you will need to take advice on how the changes affect you. We will be pleased to help.