Extra Statutory Concessions – Seventh Technical Consultation on Draft Legislation
Response by the Chartered Institute of Taxation
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Introduction
1.1
The draft legislation published on 2 October 2014 for technical consultation is
designed to enact the current tax treatment of two Extra Statutory Concessions
(ESCs): ESC D40, which is concerned with the charge to capital gains tax under
TCGA 1992 sections 86 and 87 in respect of gains made by the trustees of a nonresident trust; and ESC F15, which restricts the scope of a deferred estate duty
charge for inheritance tax purposes in certain cases involving woodlands.
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ESC D40
2.1
In principle we welcome the concept of legislating ESC D40. It is a very useful
concession and works well in practice. We note that the draft legislation is intended
to achieve the same effect as ESC D40 by insertion of the wording immediately
below into TCGA 1992 section 96 and Schedule 5 paragraphs 2A, 8 and 9:
‘a person is not to be regarded as a participator in a company controlled by
the trustees of a settlement if the person has a share or interest in the capital
or income of the company merely because of an interest which the person
has under the settlement’
2.2
We consider that if this clause is adopted, the structure and accuracy would be
improved by the removal of ‘if’ and ‘merely’ so it reads as follows (proposed
amendments shown in red type):
‘a person is not to be regarded as a participator in a company controlled by
the trustees of a settlement if where the person has is regarded as holding a
share or interest in the capital or income of the company solely by virtue
merely because of an interest which that the person has under the settlement’
Extra Statutory Concessions – Seventh Technical Consultation on
Draft Legislation: CIOT comments
2.3
27 November 2014
It would be possible to achieve the same effect more succinctly and with greater
accuracy by adopting an alternative form of words such as suggested below:
‘a person’s interest under a settlement shall not of itself cause him to be a
participator in a company controlled by the trustees of the settlement’
or
‘a person shall not be regarded as a participator in a company which is
controlled by the trustees of a settlement where the interest of that person
under the settlement is the sole basis upon which that person falls to be
regarded as having a share or interest in the capital or income of the
company’
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ESC F15
3.1
We see no reason why HMRC’s wording for the proposed statutory enactment, which
is almost identical to that of the ESC, should not meet its objective.
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The Chartered Institute of Taxation
4.1
The Chartered Institute of Taxation (CIOT) is the leading professional body in the
United Kingdom concerned solely with taxation. The CIOT is an educational charity,
promoting education and study of the administration and practice of taxation. One of
our key aims is to work for a better, more efficient, tax system for all affected by it –
taxpayers, their advisers and the authorities. The CIOT’s work covers all aspects of
taxation, including direct and indirect taxes and duties. Through our Low Incomes
Tax Reform Group (LITRG), the CIOT has a particular focus on improving the tax
system, including tax credits and benefits, for the unrepresented taxpayer.
The CIOT draws on our members’ experience in private practice, commerce and
industry, government and academia to improve tax administration and propose and
explain how tax policy objectives can most effectively be achieved. We also link to,
and draw on, similar leading professional tax bodies in other countries. The CIOT’s
comments and recommendations on tax issues are made in line with our charitable
objectives: we are politically neutral in our work.
The CIOT’s 17,000 members have the practising title of ‘Chartered Tax Adviser’ and
the designatory letters ‘CTA’, to represent the leading tax qualification.
The Chartered Institute of Taxation
27 November 2014
P/tech/subsfinal/ST/2014
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