Editor’s foreword

The pre-owned assets rules creating an income-tax charge on certain gifted assets from which a benefit may still be obtained have already been condemned in ECA. The Chartered Institute of Taxation submitted its opinion to the Government in July. It considers the rules to be “seriously defective” and even “repugnant” and “capricious”. Interestingly, they felt that older people would be particularly likely to make “understandably erroneous returns”. This is hardly a ringing endorsement and perhaps younger professionals might feel they are likely to become honorary older people in this context? It is hoped that the application of the rules might at least be delayed pending their being quietly dropped. Sadly, this seems unlikely, but as the rules are incomprehensible, their application may be so hard to spot as to prove unworkable.

In my last editorial, I flagged up the draft guidance on ‘Tackling Tax Avoidance – Disclosure Requirements’, which was set to be implemented on 1 August 2004. I described these as “nastier than expected”.

The article kindly provided for this edition of ECA by Simon McKie and Sharon Anstie was completed just before the Government appears to have slightly backtracked.

The draft rules and guidance set out by the Government on 17 May included the ‘Tax Avoidance Schemes (Information) Regulations 2004’, providing the procedures for disclosure and the contents of the information to be sent to the tax office. It also included the ‘Tax Avoidance Schemes (Promoter and Prescribed Circumstances) Regulations 2004’, which explained the circumstances where a person was not to be considered to be a ‘promoter’ for the Information Regulations. The ‘Tax Avoidance Schemes (Prescribed Descriptions Arrangements) Regulations 2004’ explained which arrangements would have to be notified under the Information Regulations.

Anything that involves three sets of interlinked regulations was bound to be complicated. As with other regulations, such as the pre-owned asset rules, it was not instituted in accordance with the Government’s own guidelines on consultation periods. It was also another unhappy expedition into Government by regulation circumventing the legitimate role of thoroughly argued statute.

The Government indicates that it is attempting to re-focus on complicated avoidance schemes marketed as such. It will, hopefully, allow most day-to-day inheritance tax and other tax planning to be dealt with as before. That is with advice from a solicitor/accountant with the proper paperwork and tax forms being completed in the ordinary way, without an enormous bureaucracy having to search through every piece of tax advice given to clients. It is assumed that the redundancy of 100,000 civil servants might have been involved in the decision-making process. There would, it is suggested, be insufficient civil servants in the whole of the UK, or even notoriously bureaucratised India, to deal with the influx of paperwork from professional advisers eager to avoid the vicious penalties associated with breaching the new regulations.

The changes are supposed to ensure that only those at the very centre of a scheme, who are capable of making appropriate referrals to the tax office, should be treated as ‘promoters’. The regulations will specifically exclude people who are not involved in those parts of a scheme that give rise to the apparent tax advantage (so tax lawyers are caught, but lawyers dealing with business-legal parts of the arrangements will not be) and people charged with organising or managing arrangements will not be caught as promoters unless there is some closer nexus with the person creating the arrangements.

Promoters can presumably be spotted by their propensity to operate in small darkened rooms in front of computer screens while their heads are wrapped in towels. The towel supplier may not be caught by the rules, but the person emptying their bin of their discarded, tax-efficient ramblings might be.

The Government has also indicated that the nature of schemes to be disclosed will not include a formula demanding that promoters work out the value of the tax benefit versus the difference between the economic benefit and cost of the scheme. Perhaps the Government couldn’t work out what it really meant either?

There will also be new ‘filters’ with the aim of homing in on the more original use of complicated financial instruments to gain a tax advantage. Presumably ‘high tar’ or high-value solutions will be allowed to pass through them, only to be caught in the regulatory net.

There will also be a list of financial products to which the disclosure rules will not apply at all. While these will include individual savings accounts and matters relating to finance leasing, it is not yet clear whether or not they would apply to what a tax adviser might consider quite mundane or common tax planning, for example, relieving the millions now trapped by inheritance tax because of the increasing value of their family home.

The rules are delayed so that they apply to require a disclosure of relevant schemes where the arrangements are thought up on or after 1 August. There will be no need for promoters to disclose arrangements marketed until 22 June and promoters will be given until 31 October to disclose arrangements at the relevant date between 22 June and 31 July.

While readers may be pleased to hear that the Government is perhaps slightly less intent to bureaucratise tax planning than at first appeared, it remains to be seen what the regulations will look like and what actual impact they will have. It is not unknown for certain businesses, including some firms of solicitors, to have not quite yet got the hang of the dreadfully complex money-laundering regulations. It is anticipated that the effect of the new disclosure requirements will not be any different.

Features

Single assessment process: Passing the April milestone Free
LYNNE BRADEY, a solicitor at Wrigleys Solicitors, considers where the NHS should be now that the April 2004 milestone is long past. It will be for readers to decide how well the single assessment process for older people is working in practice.

New disclosure duties Free
Controversial proposals, which could add to the bureaucratic burden already placed upon busy practitioners, leads to the question of when it will all end? Simon McKie and Sharon Anstey, designated members of McKie & Co LLP, examine the structure of the Finance Bill provisions, together with new disclosure requirements. Readers should also refer to the editor’s foreword for an update on these proposals.

Protecting the interests of older people: Part seven Free
DAVID COLDRICK continues the ECA series by introducing some key concepts concerning the local authority means-test for long-term care, and makes some practical observations on source materials and how to follow the structure of the law.

Fair enough? Free
The Department of Health guidance, Fairer Charging Policies: For Home Care and Other Non-residential Social Services, was issued in November 2001 because of disquiet about the way in which local authorities were devising their discretionary charging policies. PAULINE THOMPSON reviews the research that Age Concern England has commissioned into the implementation of this guidance.

Discharging older people from hospital care: Exploring the characteristics of effective arrangements Free
Hospital discharge procedures for older people have always been an important issue for readers STUART PARKER continues the ECA series of articles produced by the Sheffield Institute of Studies on Ageing (SISA) and finds that effective discharge arrangements for older people might be expected to result in about 15 per cent fewer readmissions to hospital than usual care. He also discovers that a key issue in effectiveness is the discharge team’s ability to function across the hospital and community interface.

Environmental liabilities and elderly clients Free
Steve Matthews is an engineering geologist and technical director of environmental consultants Silkstone Environmental. He provides a broad outline of some often ignored environmental issues, which can affect properties owned for many years by older or now deceased clients.

Modernising the tax system for trusts Free
Last year, the Chancellor announced plans to change the tax treatment of UK resident trusts with a view to introducing a new regime. ELENA GOGH of Ernst & Young discusses the launch of the consultation process on the modernisation and simplification of the income tax and capital gains tax system for UK resident trusts.

Growing old in prison Free
Geoff Dobson OBE is deputy director of the Prison Reform Trust. His article examines the implications of a sizeable increase in the number of older prisoners. Major changes within the prison healthcare regime and the application of the Disability Discrimination Act are likely to bring more ECA readers into contact with older prisoners as patients or clients.

Advice on antiques and fine arts for executors of deceased estates Free
Antiques or just old rubbish? In these litigious days it is vitally important to miss nothing. Vivienne Milburn, an independent antiques valuer, offers some bullet-point advice to hard-pressed executors and trustees. She flags up the case of the violin bow, which was worth more than a hundred times the price of the violin by way of gentle warning.

Regulars

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