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Conference
Meeting Points
RALPH RAY CTA (Fellow), TEP, BSc(Econ), Solicitor, Consultant to Wilsons of Salisbury reports on the IIR Conference on Tax Efficient Private Client Planning.
Contribution condition
Owen Clutton, partner at Macfarlanes, gave the following example of how the contribution condition for previously owned assets will work.
Mrs Smith gives her daughter £100,000 cash on
Conference
Meeting Points
RALPH RAY CTA (Fellow), TEP, BSc(Econ), Solicitor, Consultant to Wilsons of Salisbury reports on the IIR Conference on Tax Efficient Private Client Planning.
Contribution condition
Owen Clutton, partner at Macfarlanes, gave the following example of how the contribution condition for previously owned assets will work.
Mrs Smith gives her daughter £100,000 cash on
1 November 1997.
Daughter invests it.
In 2003 daughter buys a house with the money.
Mrs Smith moves in on 1 December 2003.
Mrs Smith will be liable to a previously owned assets charge.
Mrs Smith would avoid the charge if she delayed her move until 1 December 2004; a standing committee amendment excludes gifts of cash from the previously owned asset contribution charge after seven years.
Treaty trip
Exploring the rules on residence, John Mackay, partner in Ernst & Young, confirmed that the 'treaty trip' can still work. For example, if the Organisation for Economic Cooperation and Development (OECD) model agreement Article 13 is used for assets, gains will be taxable only in the contracting state in which the alienator is resident. This will normally cover shares, but not immovable property, business property of a permanent establishment or certain ships and aircraft.
Offshore trusts
Jonathan Burt, an Associate with Baker & MacKenzie, said that section 87, Taxation of Chargeable Gains Act 1992 is very useful to wash out gains in an offshore trust if a beneficiary is either non-resident or non-domiciled, as payments can escape a charge to capital gains tax. Payments to a resident and domiciled beneficiary should be made in a subsequent year.
It is not clear whether the five-year rule in section 10A, Taxation of Chargeable Gains Act 1992 applies to section 87, but it is safest to assume that it does.
Excluded property
Paul Whitehead, partner in Berwin Leighton Paisner, dealt with the well-known benefit of trusts created by non-United Kingdom domiciled settlors. So long as the creation of the trust and any addition of the assets occurred when the settlor was non-domiciled, any non-United Kingdom situs assets would constitute excluded property and would be outside the scope of inheritance tax.
The Inland Revenue in its guidance manual had previously set out its view that the excluded property rules overrode the rules on gifts with reservation, so that even if the settlor could benefit from the trust and subsequently became domiciled, the assets would remain excluded property. This guidance was withdrawn and replaced by a statement that in such circumstances the case should be referred to the Litigation Team. However, the Inland Revenue consultative document issued in April 2003 on residence and domicile reiterated the view that the excluded property rules overrode those on gifts with reservation — whether by accident or design is not entirely clear.
Hansard interviews
David Corker, partner in Corker Binning Solicitors, looked at the implications of R v Gill and Gill [2003] STC 1229.
a) All Hansard interviews will have to conform to the strict and formal provisions of 'Code C', section 78, Police and Criminal Evidence Act 1984. Interview suites with suitable tape recording equipment will need to be provided.
b) Those advising taxpayers invited to a Hansard interview will need to become familiar with the law relating to cautions and to inferences of guilt to be drawn from an interviewee's silence if he or she is subsequently charged.
c) The taxpayer may therefore require legal advice and the protection of legal privilege in relation to accounting and tax matters. This becomes especially important when considering the implications of money laundering.
Land valuation
Jeremy de Souza, solicitor, TEP, consultant with White & Bowker, explained that for the purposes of obtaining a reasonable price, a hypothetical vendor would be assumed to have marketed the property in the most appropriate manner. In many cases, this will involve the property being divided into lots before sale; see Commissioners of Inland Revenue v Gray (Executor of Lady Fox) [1994] STC 360.
