More IHT planning brought under DOTAS rules

Monday, 20 July 2015
HM Revenue & Customs is proposing to strengthen the 'hallmarks' it uses to identify inheritance tax (IHT) planning arrangements that must be notified by promoters and users under the Disclosure of Tax Avoidance Schemes (DOTAS) regime.

Inheritance tax planning was first brought under the scope of DOTAS in 2011, but the new hallmarks cast a wider net. An arrangement will, in future, fall under DOTAS if its main purpose, or one of its main purposes, is to obtain an IHT advantage, and if it is 'contrived, abnormal, or unlikely to have been made if there were no tax advantage'.

However, IHT planning in which 'a person makes or amends their will or codicil' is unaffected by the new rules; so is IHT planning using certain types of trust – specifically where the settled property is a fixed-term life assurance policy or where the settlor makes a loan to the trustees.

The consequences of a tax planning scheme's inclusion in the DOTAS regime go far beyond the need to notify it to HMRC. In particular, it means that users of the scheme are subject to accelerated payments demands, requiring them to pay the disputed tax immediately. HMRC can even do this retrospectively, even if the tax planning scheme was applied before the accelerated payment rules came into force.

Other DOTAS hallmarks being amended are those describing standardised tax products, loss schemes, while the existing confidentiality and premium fee hallmarks are also being changed to include IHT planning. The new rules are set out in draft regulations, the Inheritance Tax Avoidance Schemes (Prescribed Descriptions of Arrangements) Regulations 2015. They are subject to an eight-week consultation period ending on 10 September, after which they will be laid before parliament as a statutory instrument.


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