Personal Tax

Opting out of the pre-owned asset tax charge

Produced by Tolley
  • 08 Apr 2022 08:11

The following Personal Tax guidance note Produced by Tolley provides comprehensive and up to date tax information covering:

  • Opting out of the pre-owned asset tax charge
  • Effect of election ― land and chattels
  • The chargeable proportion
  • Effect of election ― intangible property
  • Making the election
  • Time limit
  • Withdrawing or amending the election
  • Late elections
  • Whether or not to make the election
  • Relief from possible double charge to IHT

Opting out of the pre-owned asset tax charge

Pre-owned asset tax (also known as POAT) is an income tax charge on the benefit of free or low-cost enjoyment of assets which the taxpayer once owned but no longer owns. It was aimed at schemes designed to avoid the inheritance tax (IHT) gifts with reservation rules, although the legislation is very widely drawn and you cannot assume that it will apply only where an avoidance scheme has been used.

Pre-owned assets are assets previously owned by an individual taxpayer and disposed of since March 1986. The charge extends to cases where the taxpayer has funded the acquisition of an asset for its use by a third person, and to those where the asset initially disposed of has been replaced by other assets which are then enjoyed by the taxpayer. Separate rules apply to land, chattels and intangible property. Certain transactions are excluded from the charge and certain situations exempted.

For further discussion of the regime generally, see the Pre-owned asset tax overview guidance note.

The guidance below discusses how an individual can make an irrevocable election to opt out of the pre-owned asset tax regime in relation to a particular asset. The downside is that the asset will then form part of the estate for IHT purposes. Separate elections can be made for different assets.

Effect of election ― land and chattels

If it is to be made at all, the election must be made for the first tax year in which an individual would otherwise

Access this article and thousands of others like it
free for 7 days with a trial of TolleyGuidance.

There's no margin for error. Think Tax.
Think Tolley.

TolleyGuidance gives you direct access to critical, comprehensive and up-to-date tax information and expertise you can rely on.

TAKE A FREE TRIAL

Popular Articles

Transactions in securities and the Phoenix TAAR on a company sale or winding-up

The transactions in securities (TiS) legislation is anti-avoidance legislation aimed at situations where close company shareholders have engineered a disposal of shares to obtain a beneficial capital gains tax (CGT) rate, ie avoid income tax, on specified transactions.The targeted anti-avoidance

21 Mar 2022 07:27 | Produced by Tolley Read more Read more

Working rule agreements

Working rule agreements are used in the construction industry and similar areas. They are national agreements made between trade unions and employers across the country, setting out the terms and conditions that apply to particular categories of hourly paid manual workers. The workers concerned are

14 Apr 2022 12:41 | Produced by Tolley Read more Read more

Capital allowances computations

Plant and machinery allowancesThree types of allowance are available for expenditure on plant and machinery:•the annual investment allowance (AIA), which currently provides a 100% allowance for the first £1,000,000 of expenditure per year, see the Annual investment allowance (AIA) guidance

21 Mar 2022 07:23 | Produced by Tolley Read more Read more