Under the Government’s latest proposals for the disclosure of tax avoidance schemes (“DOTAS”) some relatively common estate and IHT planning may become notifiable to the UK’s HM Revenue and Customs (“HMRC”). This is because the Government’s proposals entail a novel extension of the DOTAS rules in relation to IHT which will potentially catch a wider range of tax arrangements than at present.
One reason why this matters is that, whereas DOTAS began primarily as an information gathering mechanism for HMRC, since Finance Act 2014 there are a number of situations in which HMRC can now also require “up-front” payment of tax under a so-called advance payment notice (“APN”). One situation in which HMRC can issue an APN is where it has an open enquiry or appeal with an individual over tax arrangements which fall within DOTAS and in respect of which the individual has claimed a tax advantage (with the advance payment being refunded if the arrangements are ultimately held to be effective). The proposed further extension of DOTAS in relation to IHT will therefore widen HMRC’s ability to issue APNs and, in effect, to transfer to the taxpayer the economic burden of an HMRC challenge to their IHT planning arrangements. Note, though, that if an individual makes arrangements during his life to mitigate IHT on death, no APN can be issued until after the IHT charge has arisen on death.
So should private clients and the professionals advising them be concerned about the proposed extension of DOTAS in relation to IHT? And if so, how should we respond?
To view the full briefing report, please click here.
To discuss the items raised further please get in touch with Dominic Lawrance on +44 (0)20 7427 6749 or via email@example.com, or your usual Charles Russell Speechlys contact.