In its first report from November 2018, the Office of Tax Simplification (OTS) highlighted the significant difference the number of IHT forms submitted each year (275,000), and the number that resulted in inheritance tax (IHT) being due (24,500), highlighting the administrative burden of the current system. In its second report, the OTS provides suggestions of how the system could be made easier to understand, more intuitive, and simpler to operate. Recommendations Lifetime Gifts A number of IHT reliefs/exemptions apply on gifts made during a person’s life. The OTS note that these can be confusing and difficult to apply, and have therefore made the following recommendations: 1 - Replacement of several monetary gift exemptio...

Business Property Relief (BPR) and Agricultural Property Relief (APR) are reliefs that can significantly reduce or offset an Inheritance Tax liability. In previous blogs (see Related Articles below) we have discussed BPR and the issues involved in determining whether this relief is available. This blog will instead focus on APR and the definition of "agricultural purposes". What is APR? APR is available on certain transfers of property. The property can be transferred either as a gift during the individual’s lifetime or on their death. In order for the relief to apply, the following conditions must be met: 1) The property must be agricultural property. This is defined as agricultural land or pasture which is situated in the...

In our previous blog Taxpayer Clears Hurdles for BPR on Livery Business (12 September 2018), we discussed the First-Tier Tribunal (“FTT”) case of The PRs of the Estate of Maureen W.Vigne (Dec’d) v HMRC. In this case, the courts found that the services provided to horse owners (such as providing horses with hay which was grown on the land and removing horse manure from fields, daily health checks of each horse, worming, etc.), in addition to the provision of land for grazing and stabling purposes, were sufficient for Business Property Relief (“BPR”) to be available. Consequently, this allowed part of the estate to benefit from 100% relief from inheritance tax. However, an appeal against this decision was made by HMRC to the U...

As announced in Budget 2018, the government has revived controversial plans to increase probate fees in England and Wales that were scrapped before the 2017 General Election. What is Probate Probate (or more accurately a "grant of representation") is the process by which a deceased’s personal representatives get recognition from UK courts that they are legally entitled to deal with a person’s assets and liabilities (collectively known as their “estate”) after they have died. Probate isn’t always required. For example, estates that are small enough or contain simple assets like cash can sometimes be managed without probate. However, personal representatives for larger, more complex estates or those with land or foreign ...

In a departure from recent cases regarding holiday lets, the First-Tier Tribunal (FTT) has ruled that a holiday let in the Isles of Scilly is eligible for business property relief (BPR) for inheritance tax (IHT). Those looking to claim BPR on their own holiday lets may find this case instructive but should bear in mind that HMRC are likely to challenge claims until clearer precedents are set by higher tribunals or courts. Background Grace Graham and her husband purchased a dilapidated farmhouse within an acre of land in St Mary’s on the Isles of Scilly in 1972. The farmhouse was renovated and extended before being used as B&B and then country house hotel up to 2003. From 2003, the business changed in response to incre...

The government has recently published a draft of the Finance Bill 2018-19, containing measures that will form a part of the next Finance Bill. Consultation of the draft legislation will run until 31 August 2018, following which the final contents of the Finance Bill 2018/19 will be confirmed in the Autumn Budget 2018. A round-up of some of the key measures is provided below. Increase in Time Limits for Offshore Non-Compliance The current periods that HMRC are able to assess for both on and offshore non-compliance are 4, 6, and 20 years depending upon behaviour - 4 years where the taxpayer took reasonable care, 6 years where a loss of tax has arisen through careless behaviour, and 20 years where a tax loss has arisen through deliberate...

As covered in our previous blog, the introduction of the new online Trust Registration Service (TRS) has been repeatedly delayed as a result of problems with the introduction of the new system. On 5 March 2018, HMRC contacted the professional bodies outlining its policy for charging administrative penalties for the late registration of trusts and estates. HMRC previously confirmed that while the normal deadline of the 31 January for existing trusts and estates would remain in place, it would not charge penalties where registration took place by 5 March 2018. Penalties HMRC can impose the following penalties for late registration: Up to three months late - £100 penalty Three to six months late - £200 penalty More tha...

Trusts and complex estates with tax liabilities or reportable events in 2016/17 are normally required to notify HMRC of this by 5 October 2017. HMRC have now announced that as part of the introduction of the new online Trusts and Estates Register, this deadline has been extended to before 5 December 2017. Trusts and Estates Register The new online register for trusts and complex estates is being introduced as part of the EU’s Fourth Anti-Money Laundering Directive. The new register is designed to streamline the process by which trustees and personal representatives notify HMRC about their trust/estate.  Previously this process was done by paper.  The new service is also aimed at making it easier for details to be updated re...

The case of M. Ross (Dec’d) v HMRC highlights the kind of activities that the courts will look at when determining whether a Furnished Holiday Let (FHL) is a business for the purposes of Business Property Relief (BPR), thereby obtaining 100% relief from inheritance tax. The case revisits principles established in the Pawson and Green cases which were also in relation to the availability of BPR on FHLs. A review of these cases may be found here. In both previous instances, BPR was denied on the basis that the services provided in relation to the running of the FHLs was not sufficient enough to be regarded as trading income, a requirement for BPR to apply. The Facts Marjorie Ross's estate contained a 2/3 share of the Green ...

Click here to download Issue 3, 2017 of the Personal Tax Newsletter. This issue contains details of the Summer Finance Bill 2017,  provides some insightful statistics on Income Tax, and reviews a recent case concerning maintenance payments from a Will.