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Where Taxpayers and Advisers Meet
Editorial - No Consultation, No Remorse
16/09/2013, by Mark McLaughlin CTA (Fellow) ATT TEP, Tax Articles - Inheritance Tax, IHT, Trusts & Estates, Capital Taxes
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TaxationWeb's Mark McLaughlin points out that, yet again, HMRC has avoided proper consultation, this time on new IHT rules for debts, with inevitable consequences.

HMRC recently published a document 'Treatment of Liabilities for Inheritance Tax: HMRC Response to Comments on Schedule 36 Finance Act 2013', regarding anti-avoidance provisions in respect of deductions for liabilities for Inheritance Tax purposes.

The document points out: "HMRC received a number of comments and queries about the new provisions from representative bodies, practitioners, and individuals", and adds: "This note aims to respond to many of those comments, answering and clarifying the approach taken on the issues raised."

There was no consultation on these anti-avoidance measures, which may explain why a document such as this proved necessary. Why was there no consultation?

Does HMRC regret its approach in not consulting on this legislation? Far from it. HMRC justifies its approach as follows:

"The Government’s tax consultation framework allows HMRC to adopt a different approach where following the framework could present a risk to the Exchequer.

Since the provisions in this case are designed primarily to tackle avoidance schemes, consultation would have publicised the existing schemes and could have encouraged more schemes to be set up resulting in further tax losses."

I must confess that in my 25 years plus as a tax adviser, I have never come across an IHT 'scheme' involving liabilities - have you? Be that as it may, the difficulty with legislation without consultation is that you often start with legislation which is "unclear, complex, vague or unnecessary" (to quote the document on comments received about the original legislation), and despite various tinkering to improve it, you invariably still end up with legislation which is unsatisfactory, because it is not as clear and concise as it would have been with proper consultation.

What, No GAAR?

My attention was also drawn to comments about the General Anti-Abuse Rule (GAAR). The document states:

"One commentator believed that the majority of the schemes that the proposals were trying to catch would be caught by the General Anti-Abuse Rule (GAAR). HMRC’s view is that the GAAR may not apply to a number of the schemes and arrangements, and that the GAAR is intended to complement rather than replace conventional anti-avoidance legislation or measures such as Targeted Anti-Avoidance rules (TAARs)."

Why would the GAAR not apply to 'schemes' involving liabilities for IHT purposes? Probably because such arrangements are not 'abusive'. This suggests that we can still expect lots of TAARs in the future. Anyone holding out for less tax legislation in the future should abandon hope.

Best wishes,

Mark McLaughlin 

Managing Editor

About The Author

Mark McLaughlin is a Fellow of the Chartered Institute of Taxation, a Fellow of the Association of Taxation Technicians, and a member of the Society of Trust and Estate Practitioners. From January 1998 until December 2018, Mark was a consultant in his own tax practice, Mark McLaughlin Associates, which provided tax consultancy and support services to professional firms throughout the UK.

Mark is now a consultant with The TACS Partnership,  an independent tax advisory firm that provides high quality, independent advice on all UK taxation matters.

He is a member of the Chartered Institute of Taxation’s Capital Gains Tax & Investment Income and Succession Taxes Sub-Committees.

Mark is Chief Contributor to McLaughlin’s Tax Case Review, a monthly journal published by Tax Insider.

Mark is the Editor of the Core Tax Annuals (Bloomsbury Professional), and is a co-author of the ‘Inheritance Tax’ Annuals (Bloomsbury Professional).

Mark is Editor and a co-author of ‘Tax Planning’ (Bloomsbury Professional).

He is a co-author of ‘Ray & McLaughlin’s Practical IHT Planning’ (Bloomsbury Professional) 

Mark is also co-author of ‘Incorporating and Disincorporating a Business‘ (Bloomsbury Professional).

He is Editor and co-author of ‘HMRC Investigations Handbook‘ (Bloomsbury Professional).

Mark has also written numerous articles for professional publications, including ‘Taxation’, ‘Tax Adviser’, ‘Tolley’s Practical Tax Newsletter’ and ‘Tax Journal’, which provides free information and resources on UK taxes to taxpayers and professionals, and TaxationWeb’s sister site TaxBookShop.

Mark is a Director of Tax Insider, and Editor of Tax Insider, Property Tax Insider and Business Tax Insider, which are monthly publications aimed at providing tax tips and tax saving ideas for taxpayers and professional advisers. He is also Editor of Tax Insider Professional, a monthly publication for professional practitioners.

Mark is also a tax lecturer, and has featured in online tax lectures for Tolley Seminars Online.

Mark co-founded TaxationWeb (www.taxationweb.co.uk) in 2002.

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