tax avoidance (week 7) Flashcards
what is the Ramsay principle?
Statutory interpretation and involves the courts looking at the purpose behind the legislation, and applying the tax rules based on the underlying substance of the transaction rather than its form.
what is tax avoidance/tax planning?
efficient and lawful arrangement of a C’s affairs in a manner which minimises their liability to tax
what is aggressive tax avoidance?
taxpayer entering into complex or artificial arrangements which have the overall effect of reducing their tax liability.
what is tax evasion?
unlawful, where a taxpayer withholds information about assets or income to take steps to avoid paying tax they are liable for
is the ‘family maintenance’ exception available in lifetime or death?
lifetime
if a person is blind and make a will are they presumed to have knowledge?
no they are not
What is business property relief?
relief that is either 100% or 50% where the effect is to reduce the value of the taxable estate by the value attributed to the business property. must have owned business property for at least 2 years prior to distribution
how long must business property be owned before distribution for BPR?
at least 2 years prior to distribution
what qualifying business assets give 100% relief under business property relief? [there are 2]
unquoted shares (private company) regardless of size of shareholdings
business or interest in a business
what qualifying business assets give 50% relief under business property relief? [there are 2]
quoted shares (public company) if have control over the company
assets owned by taxpayer used for business purposes
what type of business is not allowed for business property relief?
business which consists wholly or mainly for dealing with securities, stocks and shares
eg, investment
what is agricultural property relief?
it provides either 100% or 50% reduction effect. reduces the value of the taxable estate by the value attributed to the agricultural property. must have been occupied for 2 years and been used for agriculture for past 7 years
what is qualifying agricultural property?
includes agricultural land and buildings for purpose connected with agriculture
farmhouses and cottages
when do you get 100% relief from agricultural property relief?
if transferor is the owner, occupier or entitled to vacant possession within 12 months from date of transfer or property was let on tenancy beginning on or after 1st sep 1995
when do you get 50% relief from agricultural property relief?
on any other agricultural property (anything that isn’t satisfied by the 100% relief)
what is woodland relief?
tax is deferred until the timber (not land) is sold or given away. only applies to the value of the trees not the value of the land.
how long must you have owned woodland for you to get woodland relief?
must have owned for at least 5 years prior to death
what is quick succession relief?
helps the taxpayer where the same asset would otherwise be subject to more than one IHT charge in quick succession. applies when person dies and their death estate includes assets received by gifts/ inheritance in past 5 years prior to death and these assets were subject to iHT.
if you inherit assets and charged IHT, then you die within a year - how much is the relief for IHT?
100% relief when you die
what is the effect if you inherit assets and charged IHT, then you die within 5 years?
100% relief = less than a year died
reduces every year and only 20% on IHT paid previously is considered where death occurs 4-5 years from original charge
what is the anti avoidance tax provision - restriction on deduction of loan for IHT purposes?
when calculating chargeable value of an estate necessary to deduct T’s debts. But, don’t when: loans made to acquire, maintain or enhance assets that qualify for BPR/APR/woodland relief / loans not repaid from estate (eg, loans to family ect) should only be deducted if they are repaid, if not repaid then don’t deduct from the estate.
[eg, if got a loan to get something that qualifies for relief and still have the loan when die then take this off the asset for the available relief]
what are the 2 requirements for GROB (gifts with reservation of benefit)?
(a) donee doesn’t assume ‘bona fide possession’ of the property at or before the start of the ‘relevant period’.
(b) at any time during the ‘relevant period’, the property ‘is not enjoyed to the entire exclusion, or virtually to the entire exclusion, of the donor and of any benefit to him by contract or otherwise’
what is the relevant period for GROB?
7 years prior to death
what is the effect of GROB if GROB is prevalent at date of death?
if GROB is prevalent at date of death then property treated as if it were part of donor’s estate for IHT
