The UK Government has published a new consultation on extending the inheritance tax exemption for armed forces personnel to all emergency service personnel who die in the line of duty.

The consultation can be found here.

“Filing outside of ARTL – urgent requests for the SDLT certificate.”

More on this from HMRC can be found here.

“HMRC has issued a consultation document about whether there may be options for simplifying the calculation of Inheritance Tax charges to which trusts are subjected at ten-yearly intervals and when property is withdrawn from trust.”

More on this can be found here.

“New regulations to introduce a charge for single-use carrier bags have been approved by the Scottish parliament.  MSPs at Holyrood backed the plan to charge shoppers a minimum of 5p for bags.  The regulations, which were approved by 100 votes to 12, will bring in mandatory charging for almost all single-use carrier bags from October. Money raised through the introduction of the charge will go to good causes.”

More on this can be found here.  An earlier blog I wrote on this can also be found here.

The England and Wales High Court has allowed the rectification of a deed of variation thus removing an avoidable inheritance tax liability of approximately £250,000.  The issue was that much of the estate in question was left to an elderly relative rather to a number of charities.  That is why there was an avoidable inheritance tax liability.

This is from the judgement:  “In the light of the matters discussed above I consider that the criteria for rectifying the Deed of Variation so that it reflects the clear intention of the Claimant at the time it was made, are satisfied, and that in all the circumstances it is right to grant the relief.”

The rectification was unopposed.

The full case report can be found here.

The April 2014 edition of HMRC’s Trusts & Estates newsletter for trusts and estates practitioners can be found here.

The Upper Tax Tribunal has ruled that it is not bound by precedent set by the England & Wales High Court.

This means that it accepted HMRC’s plea that the prior case of Pierce v Wood was wrongly decided with the result that the disposal of scrip dividend shares by the discretionary trust in question is liable to the ten-year inheritance tax charge.

The full report can be found here.

The England & Wales Court of Appeal has overturned a High Court ruling in in which an accountancy firm’s client was awarded damages against the firm because it had failed to advise him about a tax planning opportunity. The earlier decision caused some controversy and also generated quite a lot of publicity as it seemed to mean that practitioners had a contractual duty to help clients avoid tax by any legal means.

The case concerned an Iranian businessman, Hossein Mehjoo, who retained his Iranian domicile of origin for UK tax purposes. He had previously successfully sued Harben Barker for £1.4m after the firm failed to recommend he use an offshore tax avoidance scheme – known as the Bearer Warrant Scheme (BWS) – in order to reduce his CGT bill.

However, the Court of Appeal ruled that such a decision was not “sustainable” since Harben Barker “were not and had never held themselves out to be specialist tax planners”.

This is from the ruling:

“The reasonably competent accountant setting out to advise Mr Mehjoo of the tax consequences of the sale would not, in my view, have been under any obligation to raise for discussion the claimant’s domicile unless it was relevant to the CGT liability on the disposal. The accountant would have known that it gave Mr Mehjoo no tax advantages in relation to the sale of the BFL shares unless the situs of the shares could be changed. As this was something which HB neither knew or could have been expected to know was achievable, there was no reason to mention the matter still less a liability in negligence for not having done so. Although not in any sense conclusive, it is not insignificant that none of the other firms of specialist tax advisers whom Mr Mehjoo subsequently consulted suggested he should consult a non-dom specialist or raised the possibility of using a scheme like the BWS. None of them has been sued in negligence.”

One final point.  It is not clear if this ruling completely removes the presumption of an accountant’s contractual duty to help a client avoid tax.  The judgement it seems is based more on the fact that Harben Barker could not have been expected to know that their client, as a non-dom, could have switched the situs of the shares without triggering a CGT charge.

The full case report can be found here.

The England and Wales Court of Appeal has held that an “Old Master” painting is a “wasting asset” for Capital Gains Tax (CGT) purposes.

The wasting asset in this case was a painting by Sir Joshua Reynolds depicting Omai, a Tahitian brought to England by Captain Cook. The painting had been owned by the Howard family and kept at Castle Howard since 1796, but on 29 November 2001 the executors of the late Lord Howard of Henderskelfe sold it for £9.4 million.

This triggered a large capital gain. The executors claimed an exemption from CGT under s45 of the Taxation of Chargeable Gains Act 1992 (all section references are to the TCGA Act) on the basis that the painting was “plant and machinery’ and consequently a wasting asset within the meaning of s44(1)(c).

HMRC as you would expect considered the sale of the asset to be subject to a capital gains tax charge.

The First-tier Tribunal agreed with HMRC but the executors won their appeal in the Upper Tribunal.

The general rule is that a wasting asset is one with a predictable life expectancy not exceeding 50 years.  However, all forms of “plant and machinery” are wasting assets regardless of the particular asset’s life expectancy. The case therefore hinged on the definition of ‘plant and machinery’.  The classic definition of “plant and machinery” is found in Yarmouth v France (1887) 19 QBD 647: “chattels which are ‘apparatus used by a business-man for carrying on his business’ and ‘which he keeps for permanent employment in his business’”.

The main factor in The Court of Appeal coming to this possibly surprising decision is that when it analysed the TCGA 1992 it could not find any reason to justify excluding the Omai painting from being “plant and machinery”.

The Court of Appeal acknowledged that its judgement may be defying common sense to classify the painting as a wasting asset but advised HMRC that with tax definitions, they must take the rough with the smooth.  I suspect that we may hear that comment being repeated in future cases.

“On the facts of this case, section 44 may have proved inconvenient to HMRC. They must, however, take the rough with the smooth; and this case may be an example of the rough.”

The full judgement, which also outlines in full the relevant parts of the 1992 Act, can be found here.

I am surprised that Labour has backtracked on almost all of the tax proposals it made in its interim report.  I did not expect Lamont to be so thoroughly routed by her opponents in her own party on the need to extend the powers of the Scottish Parliament in any meaningful way.  The final report can be found here and my blog on the interim report can be found here.

The final report does not even go as far as the final recommendations made by the Calman Commission.  Calman recommend 6 new tax powers for the Scottish Parliament.  The Scotland Act 2012, often referred to as “Calman minus” only implements 3 of them.

This is from the final report: “We concluded that, for a variety of good reasons, VAT, national insurance contributions, corporation tax, alcohol, tobacco and fuel duties, climate change levy, insurance premium tax, vehicle excise duty, inheritance tax, capital gains tax and tax on oil receipts should remain reserved.” It is not clear from the final report if the Aggregates Levy will be devolved.  What is meant by the Crown Estate recommendation is anyone’s guess.

With regard to the only tax power left standing when the music stopped; income tax.  The interim report said: “In our view, a strong case exists for devolving income tax in full, and we are minded to do so“.  How Labour got from that point to the income tax proposal announced yesterday is again anybody’s guess.  I will come back to that point.

This announcement must also have exasperated those still arguing for “devo plus” and “devomax”.  These proposals are often misunderstood, often intentionally.  “Devo Plus” would devolve almost all tax and welfare powers.  “Devo max” goes even further. Remember there are over 25 taxes, charges and duties when comparing the Labour proposal to “devo plus” or “devo max”. The Labour proposal such as it is, when taken together with the recent announcements by the Liberal Democrats and the Conservatives may well prove to be the final straw for those arguing for the devolving of substantial powers for the Scottish Parliament. That I suspect can only be good news for the “YES” campaign.

Johann Lamont was unable to even answer basic questions on the income tax proposal when she was interviewed on Newsnight Scotland.  A link to this interview can be found here.  To be fair, I am not sure if anyone could easily explain the income tax proposal.  If I was the cynical type I might suggest that this looks like a policy that is intentionally created to make sure it never sees the light of day.  I was also interested to hear that she is opposed to tax competition if it involves Scotland.

This is from my chapter in the Hassan/Mitchell publication “After Independence” and titled: “The continuing battle for Scottish tax powers”.   Nothing it seems has changed.

“So how have the opponents of substantial tax powers for the Scottish Parliament been able to ensure that substantial tax powers are not devolved to the Scottish Parliament?  A template can be seen from Calman, what might be called the “Calman doctrine”. Make a huge fuss about having someone look at the issue, take your time, offer as little as possible, exaggerate any problems, minimise or ignore any advantages and ensure HMRC and HM Treasury remain in control.”