Draft Finance Bill 2016 Clause 60 General anti-abuse rule - penalty - CIOT comments

7 Mar 2020

The Schedule sets out the conditions for the entitlement to the additional amount (the downsizing addition), the effect of the addition, and how the amount of the residence nil‚Äêrate band that has been lost as a result of downsizing or disposal should be calculated.

This draft legislation is even more complex than the original RNRB provisions enacted in 2015. It ru runs counter to the Government‚ s commitment to tax simplification. However, some of the complexity should be viewed as inherent in the original proposals, once it was accepted that a perverse incentive not to downsize should not be created. We believe that the legislation will work in practice only if HMRC make available comprehensive (and comprehensible) Guidance and on-line calculators. We pointed out that the policy objective is not met where an individual has more than one interest in a property, for example where the deceased held their own 50% interest and was also the beneficiary of an Immediate Post-Death Interest from their spouse or civil partner‚ s estate. As currently drafted, the legislation permits only one interest to qualify for relief. Draft section 8FE sets out how the value of the RNRB which has been lost as a result of downsizing or disposal of a residence (the ‚ lost relievable amount‚ ) should be calculated. Subsection (3) freezes the value of the allowance at its value at the time of the downsizing. This is anomalous compared with the carry-forward mechanisms for both the Transferable Nil-Rate Band (section 8A) and the basic Brought Forward RNRB (section 8G); those operate on the basis that the allowance on the survivor‚ s death is increased by the percentage that the original allowance was unused.

The CIOT response can be found here.

Technical Team