Taxation and trusts: New proposals to tackle promoters and enablers of tax avoidance schemes

Contents:

• HMRC Trusts and Estates Newsletter
• TRS latest - further clarification of the new deadlines for registration
• New proposals to tackle promoters and enablers of tax avoidance schemes

 

HMRC Trusts and Estates Newsletter

(AF1, JO2, RO3)

The September 2021 edition of the HMRC’s Trusts and Estates Newsletter is now available and covers the following:

Trust Registration Service

The Trust Registration Service is now open for non-taxable trust registrations.

In summary, the following must be registered:

• non-taxable trusts in existence on or after 6 October 2020 by 1 September 2022;
• non-taxable trusts created after 1 September 2022 within 90 days;
• changes to the trust details or circumstances, within 90 days of the change.

There is also plenty of information available which guides you through what is required within the newsletter.

Inheritance tax checker launched

HMRC has updated its guidance about valuing the estate of someone who’s died to include an inheritance tax (IHT) checker which will give an estimate of the estate value for IHT and help the user decide what they need to do next based on that estimate. It does not calculate any IHT that may be due on the estate or inform HMRC about the estate’s final value.

New telephone number for the Estate Period of Administration Helpline

There is a new telephone number for the Estate Period of Administration Helpline - 0300 123 1071. This helpline deals with complex administration of estate queries.

If the estate is not complex call the Bereavement Helpline on 0300 200 3000.

The telephone number for help and advice on Inheritance Tax, Probate and Trusts is 0300 123 1072.

Administration period of Deceased’s Estates for income tax and capital gains tax

Where an estate is not regarded as complex, there may be no requirement to send a self assessment tax return to HMRC as it may be possible to use the ‘informal payment arrangements’.

Generally, a self assessment tax return (SA900) will be required for the estate if any of the following apply:

• the total income tax and capital gains tax due for the administration period was more than £10,000;
• the estate was worth more than £2.5m at the date of death.

A self assessment tax return (SA900) will be also be required for the estate if the date of death was either:

• before 6 April 2016 and more than £250,000 a year came from the sale of the estate’s assets by administrators or executors;
• on or after 6 April 2016 and more than £500,000 a year came from the sale of the estate’s assets by administrators or executors.

If the estate does not meet these conditions, then you do not need to send a self assessment tax return and can make ‘informal arrangements’.

However, in some situations, depending on assets in the estate and if assets are sold during the administration period for a large amount the estate could become a complex estate. If this happens, a self assessment tax return will not be required for the years in which the estate otherwise met the ‘informal’ estates criteria but will be required for the tax year in which the gain is realised on assets valued over £500,000 and the informal arrangements made for the previous years will remain acceptable – please see the example in the Newsletter.

 
TRS latest - further clarification of the new deadlines for registration

(AF1, JO2, RO3)

HMRC has issued clarification of the deadline for existing trusts and has indicated an expansion of the list of trusts excluded from registration.

On 1 September HMRC issued three updates to its Trust Registration Service (TRS) guidance pages, which included details on when and how and who should register.

In particular, they announced that the deadline for registrations of non-taxable trusts in existence on or after 6 October 2020 is 1 September 2022. And that non-taxable trusts created after 1 September 2022 will have to register within 90 days.

The words HMRC used in relation to the deadline for registration of existing trusts left some of us wondering how a trust set up, say, on 26 August 2022 (which would count as a trust “in existence after 6 October 2020”) would manage to register by 1 September 2022.

HMRC has now helpfully confirmed that: any trust created within 90 days of the 1 September 2022 deadline will have 90 days to register, as otherwise a trust created on 15 August 2022, say, would have very little time to register if it had to hit the 1 September 2022 deadline. Effectively, new non-taxable trusts will have to register by the later of 90 days from creation or 1 September 2022.

So, a trust created on 26 August 2022 will have to register by 24 November 2022.

HMRC has also confirmed that the Government is intending to make some additional changes to the list of excluded trusts which will not be required to register on the TRS unless they acquire a UK tax liability. This would include trusts holding healthcare insurance policies and trusts required to open a bank account for a minor child.

HMRC’s further clarification was that the deadline for upgrading the details of taxable trusts will also be 1 September 2022. Similarly, this will be the date at which the register will open for legitimate interest requests and third country entity requests.

This further clarification is clearly useful, and we are now waiting for the draft legislation and the promised update to the TRS Manual.

 

New proposals to tackle promoters and enablers of tax avoidance schemes

(AF1, RO3)

HMRC has unveiled new proposals designed to further clamp down on promoters and enablers of tax avoidance arrangements. The new rules will form part of a series of announcements of legislative measures to be included in Finance Bill 2021-22

Following a consultation held earlier this year, HMRC has, this Summer, published detailed legislation which the Government say is targeted at “the most persistent and determined promoters and enablers of tax avoidance”.

The measures, which are currently undergoing further technical consultation, are designed to build on existing anti-avoidance legislation by both helping taxpayers to identify avoidance arrangements and understand the risks associated with them at an early stage; and increasing HMRC’s powers in relation to persistent promoters of tax avoidance schemes. The measures include:

• a new power for HMRC to seek freezing orders that would ring-fence the assets of promoters and enablers of tax avoidance schemes so as to prevent them from escaping the financial consequences of their non-compliance;

• new rules that would enable HMRC to make a UK entity, who facilitates the promotion of tax avoidance by offshore promoters, subject to a significant additional penalty;
• a new power enabling HMRC to present winding-up petitions to the Court in relation to companies operating against the public interest. This measure would disrupt the business activities of such companies and ultimately remove them from the market;
• new legislation that would enable HMRC to name promoters, details of the way they promote tax avoidance, and the schemes they promote, at the earliest possible stage, to warn taxpayers of the risks and help those already involved to get out of avoidance.

The consultation on the draft legislation is open until 14 September 2021 with the new measures set to take effect from the date of Royal Assent of Finance Bill 2021-22. Further details of the proposals can be found here.

 

 

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