Personal and trust taxation including CGT and IHT

Latest updates:
HMRC issues further guidance needed in relation to the residence of individuals due to the COVID-19 pandemic

CGT Holdover relief – digital signature allowed

CGT Holdover relief – digital signature allowed

HMRC’s self-assessment helpsheet HS295 has been updated. The update includes following confirmation under the heading ‘How to claim Hold-over Relief’

Due to measures put in place to stop the spread of coronavirus (COVID-19), the form can be completed using a digital signature rather than being physically signed by both transferor and transferee, until further notice.

HMRC issues further guidance needed in relation to the residence of individuals due to the COVID-19 pandemic

HMRC have updated the Residence, Domicile and Remittance Basis Manual with a Q&A concerning international tax and coronavirus (COVID-19) at Annex D.

HMRC Trusts and Estates Agents Advisory Group and Capital Taxes Liaison Group IHT Forum 28 May 2020

HMRC’s Note of the conference call attended by CIOT and ATT representatives to address current operational issues for HMRC Trusts and Estates and Inheritance Tax can be found here.

The note includes a technical explanation of the security aspects of the Dropbox system.

June 2020 Trust and Estates Newsletter

The latest HMRC Trusts and Estates Newsletter was published on 12 June 2020 and contains a number of useful Covid-19 related updates including:

  • Confirmation that the deferral of July 2020 payments on account will also apply to trusts.
  • Details of a new, temporary email contact option for times when the Trusts and Estates helpline is busy.
  • A new process for IHT421s which HMRC will be emailing direct to HM Courts and Tribunal Service.
  • A new service allowing electronic submission of IHT400s and IHT100s via Dropbox.

HMRC is holding regular meetings with representative bodies, including the CIOT, regarding IHT systems and processes during the COVID-19 pandemic. If you have any queries or concerns about the impact of COVID-19 on IHT and trust matters, please let us know on technical [at] so we can feed back to HMRC.

Capital taxation and tax-exempt heritage assets

HMRC has published guidance highlighting temporary changes to Inheritance Tax exemptions and reliefs policy, and Capital Gains Tax reliefs policy, for national heritage property, due to coronavirus (COVID-19).

IHT Time limits
The Financial Secretary to the Treasury delivered a Written Answer on 18 May Probate Q&A:

Question by Olivia Blake MP: To ask the Chancellor of the Exchequer, what assessment he has made of the potential merits of extending probate for people who have experienced bereavement during the covid-19 lockdown and who therefore cannot meet the six month deadline for inheritance tax submission.
Answer by Jesse Norman MP: While there is no statutory deadline for making probate applications, the Government is aware of concerns about the six-month deadline for paying inheritance tax and the twelve-month deadline for filing a return. Where a taxpayer is unable to file their return on time because of COVID-19, HMRC will consider that within the scope of a reasonable excuse and as grounds for appeal against late filing penalties. The Government continues to explore all avenues to help those affected.

HMRC have confirmed that personal representatives will have to demonstrate how, in their specific circumstances, Covid-19 related issues amount to a reasonable excuse for their delay in filing an IHT return after the statutory limit (12 months after the end of the month of death). The 6-month limit for payment of IHT is unaffected. If personal representatives are unable to file an account at the 6 month point, they should estimate the IHT due and make a payment on account to prevent interest accruing.

HMRC Trusts and Estates Agents Advisory Group and Capital Taxes Liaison Group IHT Forum 23 April 2020
HMRC’s Note of the conference call attended by ATT and CIOT representatives to address current operational issues for HMRC Trusts and Estates and Inheritance Tax can be found here

IHT Operational Issues – Update 12 May
On 12 May HMRC IHT informed us that they will no longer print and stamp the IHT421 (inheritance tax probate summary form) and return it to customers.  Instead, they will email the IHT421 directly to the HM Courts and Tribunals Service. They will let the agent or taxpayer know when they have done this either by writing, or by adding a note to the IHT calculation.

On Friday 1 May 2020 HMRC also launched a new webchat service to get help to complete the form IHT400 and schedules, and to answer other inheritance tax questions. 

Further to our earlier news article on 9 April setting out that HMRC will no longer be accepting cheque payments for IHT, or making IHT repayments by cheque, HMRC have started to update various IHT forms to include space to add bank details. To date, the provision to add bank details have been added to the IHT35 and IHT100. Members should make sure that they are using the latest versions of all forms.

Query Status / response
How are HMRC interpreting ‘exceptional circumstances’ for the purposes of the Statutory Residence Test in the light of COVID-19?
The Chancellor has written to the Chair of the Treasury Select Committee to outline temporary changes to the Statutory Residence Test (SRT) for those coming to the country to work on Covid-19 related activity, to be legislated in the Finance Bill.
Note that there are also other specific aspects of this that we are putting to HMRC as they arise.

HMRC has published guidance.

Temporary changes to the Statutory Residence Test

Is the deferral of the 31 July 2020 income tax payment deferral limited to the self-employed? For example, does it include landlords?
Clarification is being sought as to whether the deferral applies to trusts, personal representatives and non-resident companies subject to income tax.
The guidance now states that it applies to Income Tax Self-Assessment payments due on 31 July 2020, and is not restricted to the self-employed. 
Support for businesses through deferring VAT and Income Tax payments
HMRC has confirmed that deferral of the 31 July payment on account applies not only to the self-employed but to all taxpayers within self-assessment, including personal representatives and trustees, and non-resident companies within the charge to income tax.
For HMRC’s guidance see Defer your self-assessment payment on account due to coronavirus.
Why do the self-assessment statements of account issued in June/July 2020 show 31 July 2020 payments on account as being due on 31 January 2021?
For further information and an update from HMRC see here.
If HMRC’s system thinks that 31 July 2020 payments on account are due on 31 January 2021, how will that affect repayment supplement calculations on overpayments?
Despite the movement of the relevant due date for the July 2020 self-assessment payment on account to 31 January 2021, HMRC have advised us that their systems will still recognise that repayment supplement in respect of payment on account overpayments is to be calculated from the original due date, 31 July 2020. 
Does the 31 July 2020 income tax payment deferral cover the entire payment, or just that arising from self-employment activities?
It covers the entire amount due on 31 July 2020.
If a business normally pays by direct debit, do they need to cancel the direct debit or will HMRC simply not collect payment?
Businesses who normally pay by direct debit should cancel their direct debit with their bank if they are unable to pay, and in sufficient time before 31 July so that HMRC do not attempt to automatically collect the payment. Direct debits should be reinstated for future payments.
How do the current restrictions affect relief from Annual Tax on Enveloped Dwellings (ATED) under FA 2013 section 137 (Dwellings opened to the public)?
HMRC have confirmed the following:
In response to your enquiry - the legislation which deals with the relief from ATED for dwellings opened to the public is in section 137 of FA2013. 
Section 137(1) says that relief is due on any day if either of two conditions is satisfied: -
  • Condition 1 - is that the dwelling is being exploited as a source of income in the course of a qualifying trade in the normal course of which the public are offered the opportunity to make use of, stay in or otherwise enjoy the dwelling as customers of the trade on at least 28 days in any year (per Section 137(2)), or
  • Condition 2 - That steps are being taken for it to be open to the public (for at least 28 days) (in that or a future chargeable period) and that it will be so exploited without delay, except so far as delay is justified by commercial considerations or cannot otherwise be avoided (per section 137(3)). 
Such a dwelling will not now be able to open because of the COVID19 current restrictions  However, we do not yet know when the current restrictions will end.
Say, for example, the current restrictions ended in August -
  • If the dwelling is opened for 28 days before 31/3/21 relief is due per section 137(2).
  • If for some reason (and I don’t know what that might be) for commercial reasons etc it cannot be opened in the remaining months of the year, relief would be due under s137(3). 
  • If the COVID19 current restrictions last all year (i.e. to 31 March 2021), relief will be due so long as it is opened thereafter without undue delay, other than the delays excepted by section 137(3). 
In terms of filing an ATED return by the 30 April 2020 deadline, Section 100(1) says that a claim to interim relief may be made before the end of the chargeable period if one or more days in the period is relievable by virtue of sections 133 to 150. This means that if at the point the company files its ATED return, the company has met either of the conditions set out in Section 137, the company can claim interim relief in that return for the remaining days in the chargeable period.  If the position changes so that relief is no longer due (i.e. either of the two conditions above are no longer met), the company must submit a further return (per section 160).   
In summary, as long as the company is opening the dwelling to the public on any day, or is taking active steps to do so without undue delay once the crisis is over, then the COVID19 situation does not affect eligibility to this relief. 
How are IHT payments and repayments currently made?
No cheques; direct banking methods and procedures are set out in HMRC’s 9 April update.
Do IHT400 and IHT100 forms still require physical signatures?
Not if an agent is acting and the procedure in HMRC’s 9 April update is followed. HMRC incorporated this update on its GOV.UK pages in relation to forms IHT400 and IHT100 on 24 April.