UK and International Tax news
Proposed Changes To DOTAS Hallmark Regulations
Thursday 18th February 2016
HMRC has recently issued a summary of responses to its consultation on proposed changes to existing DOTAS hallmark regulations describing standardised tax products, loss schemes and IHT along with draft regulations for a new financial products hallmark.
The Government announced in the March 2015 Budget that the hallmarks describing schemes which must be disclosed would be strengthened. A technical consultation on changes to the DOTAS hallmark regulations ran from 16 July until 10 September 2015.
For Standardised Tax Products, the existing hallmark is aimed at schemes which can be sold to and implemented by a wide population of clients with little variation. The changes to the rules seek to ensure that promoters cannot argue that small changes to documentation, to a sequence of transactions or the way in which a product is described make the product non-standardised and remove the requirement to disclose.
In addition the changes remove an existing “grandfathering” provision, which exempts schemes from disclosure under this hallmark if the same or a substantially similar scheme was made available by any person before the hallmark was introduced.
For Loss schemes the existing hallmark is aimed at those which generate tax losses for individuals to offset against their other taxable income or gains. The changes seek to ensure that promoters cannot argue that the projection of a theoretical profit under the arrangements at some point in the distant future exempts them from disclosing the scheme.
A new hallmark aimed at schemes using financial products has been proposed which include terms unlikely to have been entered into were it not for the tax advantage and schemes using financial products which include contrived or abnormal steps without which the tax advantage could not be obtained.
Further changes seek to strengthen and expand the existing IHT hallmark to ensure that all types of IHT avoidance have to be disclosed, i.e. schemes seeking to avoid IHT charges following death as well as during a person’s lifetime.
Confidentiality and Premium Fee hallmarks currently apply only to schemes involving IT, CGT, CT and NIC. The proposed changes expand these to include schemes involving IHT.
The Government intends for the draft regulations to come into force by the end of February 2016. HMRC will update the DOTAS guidance reflecting where necessary some of the issues raised during the consultation covered in its response document and will consult stakeholders to do so. The Government will also publish a further draft of the IHT hallmark for a 12 week technical consultation.
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