There is a fine line between legitimate tax planning and tax
avoidance. The latter can be caught under the statutory
"general anti-avoidance rule" if it constitutes a tax
arrangement that is sufficiently abusive in nature; but the former
represents an individual's right to fairly organise their
affairs to keep their tax exposure to a minimum. Tax avoidance has
been in the Government spotlight for some time, and has also
recently hit the headlines following the so-called "Panama
One of the Government's recent initiatives to clamp down on
tax avoidance is their consultation on the Disclosure of Tax
Avoidance Schemes ("DOTAS") regime
published on 20 April 2016 ("the
Consultation"). Under DOTAS, certain types of tax
planning must be disclosed to HMRC, giving them a chance to review
and rule on the legitimacy of the planning. To date, in relation to
inheritance tax, the DOTAS regime has only applied in a fairly
narrow context, but the recent consultation proposes widening this
Under the Consultation, any planning that enables a person to
obtain a tax advantage through one or more contrived or abnormal
steps is disclosable. "Contrived or abnormal" is not
defined, leaving it open to question whether straightforward,
ordinary planning – such as making an interest free loan to a
trust or a family member - might be described as contrived or
abnormal. Without an explanation of what these words mean,
virtually all inheritance planning could be within scope given that
it constitutes planning that one would not ordinarily undertake
unless legitimately trying to minimise tax exposure.
We believe that the conditions for a disclosure need to be more
tightly drafted so that it is clear what planning does and does not
need to be disclosed. Ideally, the conditions should be drafted so
as to target specific areas of inheritance tax planning that the
Government considers to be abusive. Failing which, we may be
in a position whereby simple planning routinely requires disclosing
Wedlake Bell Response
We have responded to the Consultation to explain why we disagree
with the proposed disclosure conditions, and a copy of our response
can be read here. We
will be closely monitoring the Government's response to the
Consultation and its impact on our clients.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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The signing of a double taxation agreement between the UK and the UAE in April 2016 was undoubtedly much anticipated and marks a new milestone in the successful expansion of the UAE's international tax treaty network.
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