Finance Bill Tracking Service 2007 | Budget 2007 | Budget Notes

BN28 Pre-Owned Assets: late elections

Who is likely to be affected?

1   Individuals who are liable for the income tax charge on "pre-owned assets" (POA), defined by Schedule 15 to Finance Act 2004.

General description of the measure

2   Where someone benefits from assets that are subject to the POA income tax charge, they can elect instead for those assets to be treated as forming part of their estate for inheritance tax (IHT) purposes. Legislation being introduced in Finance Bill 2007 will allow HMRC to accept elections for IHT treatment that would otherwise be too late.

Operative date

3   The measure will take effect from 21 March 2007 but, because it enables late elections to be accepted from that date, it may also apply to elections that were late before then.

Current law and proposed revisions

4   Schedule 15 to FA 2004 introduced an income tax charge from 6 April 2005 on the benefit people derive from having free or low-cost enjoyment of assets they formerly owned or they provided the funds to purchase.

5   As an alternative to the charge, taxpayers can elect for IHT treatment on the relevant property in due course. The time limit for electing is the same as the Self Assessment deadline for making a return for the tax year in which an individual is first liable for the POA charge. So for individuals who are liable from 2005/06 (the first year of the charge), the deadline was 31 January 2007.

6   Legislation in the Finance Bill will allow HMRC to accept elections made after that deadline. The legislation will apply in relation to the 31 January 2007 deadline for 2005/06 cases and to future deadlines where a liability to the POA charge first arises in a later year.

Further advice

7   If you have any questions about this change, please contact the Probate/IHT Helpline on 0845 3020 900. Information about Budget measures is available on the HM Revenue & Customs website at