Deeds of variation enable a beneficiary of an estate to redirect all or part of their inheritance so that for inheritance tax and capital gains tax purposes the redirection is read back to the date of death and treated as if made by the deceased. The Government has been concerned over abuse of the tax advantages of variations and published a review to seek evidence from practitioners to explore the extent of the use of variations for tax purposes.
Following responses to the review, the government have decided not to introduce any restrictions on the use of variations for tax purposes but will keep their use under review.
This is a common sense decision and is good news for families who need to use deeds of variation for a number of familial reasons. Variations are most often used for family rather than tax reasons – often being referred to as deeds of family arrangement – and it is helpful that variations will continue to receive beneficial tax treatment.