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Following a successful trial period, HMRC have announced an extension of their clearance procedure. 

At Pre-Budget Report 2007 HMRC announced that the clearance procedure would be extended over a period of time to provide business with their view of the tax consequences of significant commercial issues wherever there is uncertainty, regardless of when the legislation was enacted. HMRC also committed to responding to clearance applications within 28 days as the norm.

A six month trial commenced in May 2008, extending the service to business owners in relation to inheritance tax Business Property Relief (BPR) where there was a significant commercial issue or transaction of the business itself. HMRC have now confirmed that the inheritance tax BPR clearance service for business owners will continue and will include an extension to the scope of the service.

As with other clearances, HMRC will now, as a result of the successful trial:

• remove the four Finance Act restrictions that inheritance tax clearance applications are subject to under Code of Practice 10 (COP10) where the application relates to the availability of business property relief;
• expect applicants to demonstrate the commercial significance of the transaction that causes genuine uncertainty;
• expect them to identify what aspect of the law or HMRC practice they consider to be uncertain; and
• respond within 28 calendar days, as the norm.

From 23 January 2009, HMRC will also provide their view of the tax consequences of a transfer of value that involves a change of ownership of a business where this transfer, leaving aside the application of business property relief, would result in an immediate inheritance tax charge and provided that the other conditions are met. Clearances in these change of ownership cases will remain valid for a limited period of six months.

A taxpayer who has previously had an application rejected because it fell outside the scope of the trial service, but the circumstances are such that it would be included in the scope of the extended service, may request a review of the original application.