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HMRC watch: Revised guidance on the settlements legislation

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28th Nov 2007
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HMRC have now updated their guidance on the settlement legislation following the decision of the House of Lords in the case of Jones v Garnett “Arctic Systems”, which was made in favour of the taxpayer.

The changes to the guidance put Revenue practice in this area back to where the majority of tax agents thought it was prior to 2003. However, there is also some new guidance in respect of areas such as:

  • Operation of the outright gift exemption for married couples and civil partnerships
  • The transfer between spouses Iand civil partnerships) of managed service company shares - these shares may be regarded as having limited capital rights
  • Updated examples of settlements in general terms for couples and minor children
  • More complete and better briefings on the troublesome subject of dividend waivers.

The new guidance is now available in the Trusts Settlements and Estates Manual at TSEM 4000 onwards. HMRC say that the online version will be available shortly but, in advance of that, they are making it available as a pdf. Despite the fact that the helpsheet is well written, your average taxpayer will struggle with some of the terminology, but then again, most average taxpayers will not be in the habit of creating settlements, or will they?

Trusts, Settlements and Estates Manual updates (PDF 161K)

Helpsheet 270 which accompanies the Trusts and Estates pages of the SA return has also been revised.

Helpsheet 270 Trusts and Settlements – Income treated as the settlor’s (PDF 385K)

We will be taking a much closer look at HMRC's guidance shortly, and have updated the following article: Tax basics: The settlement provisions and children.

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By AnonymousUser
30th Nov 2007 19:25

Echoed but
it is still worth being familiar with. There is more there than just the points in Jones v Garnett (dividend waivers and gifts to children for example) and I expect that HMRC will be looking for cases which are marginal to try and limit the effect of that decision. Partnerships maybe?

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By JackHarper
03rd Dec 2007 18:01

Double Non-Taxation
Examples 22 and 23 are the same. Have they left a taxable example out? Perhaps it went in the post on a CD.

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By mikewhit
04th Dec 2007 13:19

Sharing of risk / "income split"
Any update on the threatened topic of "income splitting" ?

Encouraged in the USA and Isle of Man ....

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By Simon Sweetman
04th Dec 2007 16:24

any day now
I had expected the draft legislation and guidamnce to be out by now, though there is apparently a delay...but I'm sure they won't br long !

It is unlikely to leave much work for the settlements legislation to do, I suspect.

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