Did you know that we now have a Treasury Office for Tax Simplification (OTS)? The OTS’s idea of simplification is such that they see the abolition of ‘complex’ tax reliefs as a major target for reform.
Because of this, explains Tax Partner Peter Crix, many of the rules that provide exceptions and exemptions from tax in certain circumstances are under threat. So, if you regularly use tax reliefs for inheritance tax planning or for tax limitation you might want to read on.
The OTS intends to focus its attention on those reliefs that:
- Are largely historic
- Are not frequently used, or that
- Benefit a small number of taxpayers, but may create distortions in the tax system
However, a concern is that they are also including those that are used by a larger number of taxpayers, but are too complex for business and/or HMRC to administer. This appears a little ominous, and alarming as it includes a number of tax reliefs that are widely used and generally regarded as important safeguards against unfair taxation.
A good example is the potentially exempt transfer, which relieves lifetime gifts from inheritance tax after seven years; a tax relief used by many and an important component of inheritance tax planning. Other examples are the capital gains tax reliefs for private residences, venture capital trusts and enterprise investment schemes and other very important inheritance tax planning reliefs that currently apply to business and agricultural property.
Some reliefs have already been scrutinised by the OTS on a sample basis. It considers that in general capital gains tax relief for private residences should be retained, but the rule which exempts the last three years of ownership - and assists the practice of ‘flipping’ - is ‘questionable’. It will also be a cause of great relief that the exemption for foreign players’ earnings in the 2011 UEFA Champions League final has been given the thumbs up!
If you regularly use tax reliefs as part of your inheritance planning or within your business or you would just like to see what still may be available to you, please contact Peter Crix.