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New DOTAS IHT hallmark guidance

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HMRC has published guidance to replace the IHT chapters (12 and 13) of its main DOTAS guidance, to reflect the new IHT hallmark which came into effect from 1 April 2018.

The grandfathering provisions that excepted certain arrangements in place before 6 April 2011 will cease to apply from 1 April 2018. This means arrangements that would have been excepted from disclosure under the old hallmark will, from 1 April, have to be tested against the new IHT hallmark.

A new ‘established practice’ exemption will remove the need to disclose established IHT planning schemes entered into before 1 April which are ‘substantially the same’ as other arrangements HMRC has previously agreed.

The new hallmark widens the scope of the 2011 hallmark, which was focused on preventing avoidance of an IHT entry charge when transferring property into relevant property trusts. The new hallmark has two conditions, both of which have to be met for arrangements to be notifiable.

Condition 1 is that the main purpose, or one of the main purposes, of the arrangements is to enable a person to obtain an IHT advantage in relation to one or more of the following:

  • avoidance or reduction of a relevant property entry charge;
  • avoidance or reduction of the charge on relevant property at the ten-year anniversary or at any other time, the charge on property leaving employee or newspaper trusts, and the charge arising in connection with close company transfers;
  • avoidance or reduction of the charge on gifts with reservation of benefit, where there is also no pre-owned asset income tax charge; or
  • reduction in the value of a person’s estate without giving rise to a chargeable transfer or potentially exempt transfer.

Condition 2 is that the arrangements involve one or more contrived or abnormal steps without which the tax advantage could not be obtained. Whether arrangements are contrived or abnormal, or involve contrived or abnormal steps, has to be considered from the point of view of an ‘informed observer’. The informed observer is not necessarily a tax practitioner, but is independent, has all the relevant information about the scheme and has sufficient knowledge to understand both the scheme and the relevant statutory context.

The guidance contains several examples of arrangements which would not be notifiable under the new hallmark. See


Issue: 1393
Categories: News