The Finance Bill 2016 introduced a new Targeted Anti-Avoidance Rule (TAAR)  for distributions made on the winding-up of the company. The aim behind this measure is to prevent shareholders of close companies from extracting cash as capital (and thereby being taxed at the more generous capital gains tax rates) rather than as dividends. Members’ Voluntary Liquidations HM Revenue & Customs was concerned that in light of the increased dividends rates, members of close companies would use Members’ Voluntary Liquidations as a means of distributing reserves in capital form rather than as dividends in order to obtain a tax advantage. In particular, these provisions will affect taxpayers who liquidate a company and distribute ...

In light of fierce criticism by professional bodies, HM Revenue & Customs has postponed its plans to extend the Disclosure of Tax Avoidance Schemes (DOTAS) regulations to inheritance tax (IHT). Under the DOTAS regime, tax avoidance schemes must be disclosed to HMRC if an arrangement’s main purpose is to obtain a tax advantage, and where the scheme falls within one of a number of descriptions, known as 'hallmarks'. The now withdrawn draft legislation would have meant that the anti-avoidance DOTAS rules would have been extended to cover most types of IHT planning. However, it was felt that in its current form the proposals were too broad in scope and would risk catching ordinary IHT planning products that are not abusive. Cert...

UPDATE: HMRC has shelved plans to extend DOTAS rules to IHT HMRC have announced that the Disclosure of Tax Avoidance Schemes (DOTAS) rules will be extended to Inheritance Tax. This means that arrangements which an “informed observer” could conclude are an Inheritance Tax avoidance scheme or arrangement would be disclosable under DOTAS. Draft legislation states that an arrangement will be considered to be a  tax avoidance scheme where condition 1 and either condition 2 or condition 3 have been satisfied: Where the main purpose of arrangements is to obtain an advantage in relation to inheritance tax , and either One or more elements of the arrangements would be unlikely to have been entered into but for the obtaining of the tax ad...

See our Spring 2014 Tax Update for more recent cases. The inheritance tax case of Buzzoni and Others v HMRC concerning gifts with reservation of benefit was recently heard in the Court of Appeal. Background The background to the case is that after acquiring a leasehold interest in a property, Mrs Kamhi gifted an underlease of the property to a family trust in 1997. The terms of the underlease included a covenant for the family trust to keep the property in good repair, to keep it clean and decorated.  The trust was also required to pay the annual service charge for the property. The existence of the underlease meant that the value of the headlease in Mrs Kamhi's estate was substantially reduced. The executors completed the IHT forms ...

New measures were announced in the Autumn Statement 2013 to clamp down on users of marketed avoidance schemes. Where HMRC successfully challenge an avoidance scheme at the Tribunal or Courts, all other users of that scheme will be obliged to either change their return to reflect that decision or explain to HMRC why they should not. If taxpayers choose not to amend their return and the scheme later fails on the same point of law they will be liable to pay a tax geared penalty (in addition to the tax and interest payable because of the failure of the scheme). Further rules will accelerate the timing of the payment of the disputed tax.  From the date of Royal Assent (expected in July 2014) HMRC will be able to issue an avoidance followe...

The General Anti Abuse Rule (GAAR) was introduced in the Finance Act 2013 and takes effect from 17 July 2013. A key issue for any advisors providing tax planning advice is now whether the strategy suggested is "abusive". If it is and HMRC are effective in implementing the GAAR the tax result of the transactions will be deemed to be what would have happened should a reasonable course of action been taken. All other tax rules will continue to apply.  In effect the GAAR will be HMRC's "back stop", if they consider the tax planning to be too good to be true and no other rules can charge the planning to tax in the way that HMRC would consider to be appropriate; given the intention of the legislation in question. HMRC's website provid...