Since 6 April 2005, there has been a new stand-alone income tax charge — called pre-owned assets tax (POAT) — which is specifically targeted at complex trust-based schemes that had successfully sidestepped IHT. The main target for POAT was the many thousands of people who gave away their houses but continued to live in them. There are specific rules against that kind of ploy, but the schemes got round them — until POAT appeared. As our regulators require us to point out, tax rules can and do change.

POAT can apply to gifts made as long ago as 18 March 1986 and has been widely criticised by the legal and accountancy professions as retrospective. The government seems determined to crack down on what it perceives as unacceptable tax avoidance. The unspoken message is that any further inventive tax planning could suffer the same fate.

Ironically, the introduction of POAT has had one beneficial effect if you are interested in saving IHT. The uncertainty caused by the legislation forced the Inland Revenue to give its opinion on the tax position of the more widely available inheritance tax planning schemes. Up to that point, and for obvious reasons, the Revenue had been extremely reluctant to provide anything approaching a seal of approval to such schemes. Thus we now know that a number of arrangements that allow you to make a lump sum gift at a discount to its face value and receive regular payments are acceptable to the Inland Revenue.

While these lump sum schemes can help resolve your IHT problems, on their own they are unlikely to make your IHT liability disappear. The simplest way to deal with the remaining liability is to make sure that the funds are there to meet the tax bill when it arrives. This will usually mean a whole-of-life assurance policy, placed under trust for your beneficiaries. Of course you should not take on such a commitment unless you can be sure of being able to keep up the premiums.

There have also been recent developments with such life policies. Some major insurance companies have launched policies with premiums that are fixed for life, rather than subject to regular (and sometimes costly) review. The initial outlay is generally higher than for a reviewable policy, but you may feel that the price is worth paying for the certainty of no future increases.