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Not always the case….

One of the most enjoyable aspects of the work that we do at Mallon:Tax is that we assist a number of general accountancy practices with specialist tax queries. Sometimes those queries consist of working with the partners and their clients in designing and then implementing some tax planning arrangements but occasionally, I am asked to comment on tax planning suggested by others.

This gives me a useful insight into the approaches used by other firms to win work.  Recently a matter was referred to me which demonstrated how far some advisers are willing to go.


The case involved an individual who owned shares in a company and who was interested in the how he might be able to reduce the potential Inheritance Tax charge associated with those shares.  The company concerned was not a trading company and therefore would not qualify for a relief which would have exempted the value of the shares from IHT. The individual’s retained accountant consulted me after another advisor suggested a series of transactions involving, amongst other things, the creation of two subsidiary companies and the creation of an intercompany loan.  The purpose of these transactions, it was said, was to create in one of the new companies, a business of lending money.  The advisor said that case law confirmed that the provision of loan finance amounted to a “trade” which would then enable the shares in question to be exempted from IHT.

After some correspondence with the adviser involved, they confirmed the case law upon which they were relying for their advice.

Facts, facts, facts…

It was undeniably true that the case did indeed decide that loan finance could amount to a business qualifying for IHT relief but the facts of the case were entirely different to those in our client’s case. The judgement delivered was clear that the decision reached was based on the particular facts of  the case and specifically the judge indicated that it wasn’t clear that a company lending money would always qualify for relief.

Nonetheless, the adviser gave the impression that there was little doubt about the application of the decision.  When pressed, the adviser indicated that these arrangements had been implemented by him on many occasions but in none of those occasions had HMRC expressed their opinion on their efficacy.

Bull in the Wild West?

Many will remember the days some year ago, which I now refer to as “the Wild West”, when all sorts of salesmen came out of the woodwork promising all sorts of tax savings from investing in all manner of obscure assets including on one occasion hotels in Montenegro!  Thankfully, those times have largely passed but there are still those who, to put it mildly, need to improve their due diligence on the planning they are suggesting!  Be careful out there!