This site uses cookies. By continuing to browse the site you are agreeing to our use of cookies. To find out more about cookies on this website and how to delete cookies, see our Cookie Policy.

Tools which collect anonymous data to enable us to see how visitors use our site and how it performs. We use this to improve our products, services and user experience.


Tools that enable essential services and functionality, including identity verification, service continuity and site security.

Where Taxpayers and Advisers Meet
STEP UK Annual Tax Conference 2019:
18/06/2019, by Mark McLaughlin CTA (Fellow) ATT TEP, Tax Articles - Inheritance Tax, IHT, Trusts & Estates, Capital Taxes
Rating: 0/5 from 0 people

Mark McLaughlin reports on a number of issues raised at the 2019 STEP Annual Tax Conference.

Date: 12 June 2019

Location: Leeds

Speakers reported:

  • Simon Douglas, Barrister, 5 Stone Buildings
  • Emma Chamberlain OBE, TEP, Barrister, Pump Court Tax Chambers
  • Dawn Register TEP, BDO LLP
  • Russell Frimston TEP, Russell-Cooke Solicitors
  • Robert Jamieson TEP, Mercer & Hole
  • Philip Whitcomb, Moore Blatch Solicitors
  • John Barnett TEP, Burges Salmon LLP

Future Tax Charges - a Warning

Simon Douglas pointed out that trustees must be alert to the danger of a tax charge arising in the future for which they are liable. It is important to ensure that sufficient trust property is retained tocover this eventuality. Similar considerations apply to personal representatives when distributing the deceased’s estate. The point was illustrated recently in Harris (PR of McDonald dec’d) v RCC [2018] UKFTT 204 (TC), in which the personal representative of an estate was held responsible for the Inheritance Tax payable on the deceased’s death, and his appeal on the grounds that he did not have the funds to pay the liability after distributing estate assets to a beneficiary was struck out as having no reasonable prospect of success. The First-tier Tribunal judge in that case warned: “It is no defence to any Inheritance Tax determination that Mr Harris may have transferred the assets of the estate to a beneficiary on the basis that the beneficiary would be responsible for payment of the Inheritance Tax due.  Nor is it a defence that Mr Harris was ignorant of his obligations, as a personal representative, to pay the Inheritance Tax owing.”

Practical Problems for Trustees

Emma Chamberlain OBE highlighted a selection of potential problems for trustees. These included the need to check the domicile of the settlor, and in particular whether he is a returning foreign domiciled (‘formerly domiciled resident’) settlor of an excluded property trust. This is because excluded property status for Inheritance Tax purposes is lost after the settlor has been resident in the UK for one tax year. Emma also recommended checking the terms of trust deeds for potential reservation of benefit issues, such as whether a returning foreign domiciled settlor is capable of benefiting from an excluded property trust they have created. In addition, loans to beneficiaries should be reviewed to establish how they are being used; if the loan is for the purchase of UK residential property, this is likely to involve the trustees of an excluded property trust in some difficult IHT liabilities (under IHTA 1984 Sch A1, which was introduced in F(No 2)A 2017). The formalities of past trustee retirements and appointments should also be checked, and particularly the chain of title to the trust assets. Some care will also be needed in establishing the situs of trust assets, in relation to potential IHT charges for excluded property trusts.

Dealing with HMRC

A summary of useful pointers when dealing with HMRC was provided by Dawn Register. Taxpayers and their advisers should never underestimate the amount of data that HMRC hold, particularly in relation to offshore matters. Increased global tax transparency and developments such as the Common Reporting Standard have improved the flow of information to HMRC. There are also extended offshore assessment time limits (TMA 1970 s 36A for Income Tax and CGT purposes, and IHTA 1984 s 240B for IHT purposes). Dawn considered that although the deadline under the ‘requirement to correct’ provisions for offshore irregularities (in F(No 2)A 2017 Sch 18) had passed, voluntary disclosure was still the best option, such as in terms of lower penalties for failure to correct, and a smoother process compared to an investigation started by HMRC. The concept of ‘reasonable excuse’ provides a useful exception from penalties for certain compliance failures (e.g. late tax returns), and the Upper Tribunal’s approach in Perrin v Revenue and Customs [2018] UKUT 156 (TCC) may be helpful in this context. The Upper Tribunal suggested a four-part test for use when deciding whether a taxpayer has a reasonable excuse. Dawn also pointed out that tribunal cases have been testing HMRC powers versus taxpayer rights. Trustees face additional compliance obligations (e.g. under the trust registration service), and particular care is therefore needed by professionals when acting for trust clients.

Entrepreneurs’ Relief and Incorporations

One of the problems with Entrepreneurs’ Relief following its introduction in 2008 related to business incorporations. For example, a sole trader who incorporated his business and then sold his shares shortly afterwards would not have qualified for the lower rate of CGT, as he had not held those shares for the requisite 12-month period. A shareholder’s Entrepreneurs’ Relief ‘clock’ only started upon acquiring his shares in the newly-incorporated company, and he was not permitted to take into account the period when he owned the business as a sole trader. Whilst it was possible to make an election to disapply Incorporation Relief (under TCGA 1992 s 162A), the election only provides Entrepreneurs’ Relief up to the date of incorporation, but not beyond. However, Robert Jamieson pointed out that following a useful provision introduced in FA 2019 for share disposals from 6 April 2019, a taxpayer can now include in the qualifying Entrepreneurs’ Relief ownership period of 24 months both the period when he carried on his sole trader business and the post-incorporation period (TCGA 1992 s 169I(7ZA) and (7ZB)). However, it is important to note that this aggregation rule only applies where a sole trader (or partnership) is incorporated under TCGA 1992, s 162. Thus the whole assets of the trade (other than cash) must have been transferred as a going concern in return for an issue of shares in the company. This aggregation rule does not apply to an incorporation which relies on holdover relief for business assets under TCGA 1992 s 165, or where the assets are sold to the company (with the proceeds being left outstanding on loan account).

Tax Planning Around ‘Hope’ Value: CGT versus IHT

Philip Whitcomb noted that there are tax planning issues arising from the variance of probate values for potential development land. On the assumption that the beneficiaries will want to sell the land for development, a high probate value creates the base cost for CGT purposes. In the case of farming businesses, hope value is not covered by Agricultural Property Relief (as the relief applies to agricultural value), although Business Property Relief (BPR) may be available. Assuming BPR at 100% (or 50%) will be obtained on the value at death, the beneficiaries will want as high a probate value as possible, to obtain the highest possible base cost. However, what happens if the BPR claim fails? In addition, IHT could be paid at 40% on the development (‘hope’) value. In some instances, there could be a conflict of interest with the beneficiaries. Separate independent advice should therefore be taken by the beneficiaries. Quality professional valuations should also be obtained for pre-death planning and probate purposes.

In other lectures, Russell Frimston discussed the importance of the EU for STEP members. John Barnett explored the disclosure of tax avoidance schemes provisions and related issues.

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 ( in 2002.

Back to Tax Articles

Please register or log in to add comments.

There are not comments added

Tony Talks - 


Tony Margaritelli discusses what the 2020's will hold for Accountants in his latest in practice blog.