The Association of Taxation Technicians (ATT) has welcomed, with reservations, the passing of a government amendment to the Finance Bill that reduces the problems around the treatment of liabilities for Inheritance Tax (IHT) purposes. This is something the ATT and the Chartered Institute of Taxation (CIOT) have both been pressing for.
The Association had previously called for a ‘targeted approach to abuse of Business and Agricultural Property Relief’ (BPR/APR)1 and so, the exclusion from the new provisions of pre-existing liabilities that were created before 6 April 20132 is encouraging news.
Yvette Nunn, President of the ATT, commented:
“This change, proposed by the ATT and tabled by the Government, demonstrates the importance of the consultation process in framing practical legislation.
“However, we remain concerned that the proposals still proceed on the unfounded assumption that there is an unfair advantage to be gained from buying an asset that qualifies for BPR or APR with borrowed funds.
“It is wrong to assume, as it appears HMRC has, that all loans used to buy relievable assets are part of some tax-planning arrangement. There is a continuing perception that borrowing gives rise to additional relief; that simply is not the case. Because of the limited nature of the amendment, such liabilities incurred after 5 April 2013 will have the effect of restricting the benefit of BPR and APR. This may discourage the very investment in UK businesses that the economy so urgently needs.
“On a more detailed note, the exemption for pre-April 2013 borrowings will not apply if the loan terms are subsequently amended. There will also be a problem if a borrowing is used to fund the purchase of an asset that only partially qualifies for BPR or APR as the whole loan will be disproportionately set against the value of the relievable part.
“The exemption of pre-existing liabilities is of course welcome but it is a pity that there was no consultation before the publication of the Finance Bill. If that had happened, we might have been able to avoid the continuing problems that we have outlined.”
Notes to Editors
- The new amendments were tabled by the Government in the Report Stage of the Finance Bill, transcripts of which can be found here: http://services.parliament.uk/bills/2013-14/finance/stages.html