HMRC to review Deeds of Variation to prevent IHT abuse

The government has announced plans to consult on the future use of deeds of variation (DoV) in a bid to clamp down on perceived abuse of the inheritance tax (IHT) system, following an initial announcement in the March Budget under the coalition

Any deeds made on or after 1 August 2002 only have to be delivered to HMRC where they result in a change to the amount of tax due. As a result, HMRC says that it has limited information about the use of DoV, particularly for purposes other than gaining a tax advantage.

If made within two years of death a deed of variation can result in a change to the amount of inheritance tax (IHT) or capital gains tax (CGT) due.

HMRC has issued a nine question online questionnaire to gauge views on the current working of DoV, including the reasons for using the structure, the impact of current tax law on their use, and whether they are used for tax planning purposes to reduce the tax liability for estates.

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