More finance bill clauses stray beyond the brief...

13 February 2017

The draft Finance Bill clauses published in December 2016 contain several examples of provisions that seem to have an effect beyond the stated target.

One such set of provisions is the new Schedule A1 to the Inheritance Tax Act 1984 which can be found in Schedule 13 to the draft Finance Bill.

This new Schedule contains provisions which are designed to prevent shares in closely-held companies which derive their value from UK residential property from being treated as “excluded property” for inheritance tax (IHT) purposes and so outside the scope of IHT. The principal target of these new rules is to extend the scope of IHT to UK residential property owned by non-domiciled individuals through offshore structures.

Various representative bodies have made representations about these provisions which seem to extend not only to individuals owning a home through an offshore corporate structure but also, for example, to certain private banks which make loans secured on UK residential property. Another aspect of the new rules is that they make no distinction between companies that hold residential property for personal use by the shareholders or as an investment and those, such as residential property developers, which hold real estate as part of a trade. Under the current drafting of Schedule A1, the result is that shares in a closely-held non-UK incorporated company which is a developer of residential property in the UK or which is the parent company of a UK company that is undertaking such development are no longer excluded property.

This seems contrary to the policy behind the legislation. And while it may often be the case that shares in real estate developers will qualify for business property relief from IHT, others will not. Perhaps some thought could be given to an exception for property developers similar to the exclusion from the Annual Tax on Enveloped Dwellings (ATED). It might even begin to look like a consistent policy.


The UK Prime Minister, Theresa May, has formally given notice under Article 50 of the EU Treaty of the UK’s intention to leave the EU. That notice begins the two period during which the UK will negotiate the terms of its exit from the EU with the other 27 EU member states (the "EU27").

This note sets out some of the key tax issues that corporate taxpayers will face in March 2019 in the absence of a specific agreement with the EU27 and in the absence of any agreement on an extension to the two year period.