Death duties blow for super-rich

RADICAL proposals to shift the burden of inheritance tax away from Middle Britain to large landowners and the super-rich are being considered by the Treasury.

The plan would make good a pledge given by Chancellor Gordon Brown seven years ago to shield the bequests of prosperous, hardworking families while ensuring that the very wealthy can no longer treat inheritance tax as 'voluntary'. If the blueprint is approved, it could appear in Brown's Pre-Budget Report, due at the end of this month.

Inheritance tax reform unites both major parties, which believe the £2.5bn it raises each year is paid largely by the middle class and that it scarcely touches the super-rich or big landowners.

In 1994, Brown, then in opposition, committed Labour to making the tax operate fairly. It is thought one proposal would raise the threshold from £242,000 closer to £400,000, costing the Treasury £1.4bn. But the impact would be offset by increasing the period before death at which property must be transferred to escape the tax.

At present, inheritance tax can be avoided if a property is transferred seven years before the owner's death; that may be raised to something nearer 10 years. The Treasury believes that fewer people would be willing to give up their property rights to their heirs for such a long period of time.

And proposals to block loopholes favoured by the wealthy involving farmland and other assets and the 'deed of variation', effectively a document allowing widowed spouses to alter the deceased's will to avoid tax, would further help to close this gap. Brown promised in 1994 that any crackdown would include 'arrangements to protect family businesses from being broken up'.

Together, these changes could be presented as shielding hard-working homeowners and small business people from death duties while forcing the very rich to pay their share.

A key feature of Brown's Pre-Budget Report will be a package worth up to £50m to assist small businesses train their workers and help close the 'productivity gap' with Britain's major competitors. Last week, the Chancellor welcomed a joint study by the Confederation of British Industry and the TUC that called for a training tax credit for businesses as well as financial incentives for individuals to improve their skills.

The study came hot on the heels on the humiliating collapse of Labour's flagship scheme for 'individual learning accounts', which was suspended after a number of fraudulent 'training providers' were found pocketing public money.

At the CBI conference dinner in Birmingham tonight, Brown is expected to hint at more funding for training and skills.He is expected also to mention controversial proposals to 'streamline' the planning system, which will delight his audience but enrage conservationists.