HMRC to chase unnecessary levels of tax payer information

The government's plans to bring almost every form of inheritance tax (IHT) planning into the disclosure of avoidance schemes (DOTAS) regime will swamp HMRC with information it does not want or need.

Law firm Boodle Hatfield state the tax authority's consultation on changing the 'hallmarks' of financial products will 'require even straightforward arrangements to be disclosed'.

The 'hallmarks' detailed to in the Finance Act 2015 refer to the 'detail of arrangements that fall to be disclosed'.

The consultation proposes draft regulations designed to strengthen these hallmarks with regards to arrangements involving IHT.

Geoffrey Todd, a partner in the private client and tax team at Boodle Hatffield, said: 'These proposals have largely gone unnoticed.

'They have been consulted on before and in response, the government suggested that it would clarify the scope of the draft regulations, but this has not yet happened.'

Todd expressed particular concern about the need to report participation in any arrangement where a person would be unlikely to enter into it, other than to obtain an IHT advantage.

'[This] latter condition is particularly unclear and potentially very wide', he warned.

'There are specific exceptions, most notably for planning by means of a will, but these are in contrast fairly narrow. A great range of lifetime IHT planning arrangements could potentially be caught.'

Todd explained: '[The current] regime requires individuals and their advisers to notify HMRC of any tax avoidance schemes within a set time scale. It has been in existence for some time but currently only applies to IHT to the extent that a scheme seeks to avoid an IHT entry charge on a lifetime transfer into a trust.'

The draft regulations, which are out for consultation until 10 September, will encompass 'any arrangements that aim to avoid IHT either on death or on lifetime transfers', he added.

Binyamin Ali is editor of Private Client Adviser