The pre-owned assets (POA) income tax charge was introduced in the Finance Act 2004 and the first year in which a POA charge could arise was back in 2005-6. The POA charge is effectively a tax on individuals who have given certain types of assets away but who continue to enjoy either full or partial benefits from the assets. The charge was introduced to help combat the problem of inheritance tax schemes that sought to remove large chunks of an estate from the inheritance tax net. The POA charge can apply to arrangements that were in place as far back as March 1986.The most common example that creates a POA charge is when a property is given away during a person’s lifetime, but the person continues to live in the home rent free. Such gifts are known as ‘gifts with a reservation of benefit’. Since the charge has been introduced the majority of cases relate to property, however, the charge also encompasses other assets including land, chattels and intangible property or cash, stocks and shares and insurance products.Where the POA charge applies, there are provisions which set out how the taxable benefit is to be calculated. There are different provisions depending on the asset class, but for property, the charge will be based on the open market rent value of the property in question. Planning noteThe POA is levied as an annual income tax charge, although in some circumstances the liability to the POA charge is not discovered until the taxpayer has died. If you think you might be affected by this rule, please let us know so that we can determine liability, if any arises.