This guidance is for the use of the business owners who make clearance applications in relation to Inheritance Tax Business Property Relief.
Guidance for the use of business customers who wish to apply for a non-statutory clearance can be found on the HM Revenue & Customs (HMRC) website. The current service for other non-business customers continues. Non-business customers should continue to refer to the existing guidance in Clearance and Approvals 1.
In developing the new clearance service HMRC wanted to provide a facility that was as useful as possible for UK businesses as a whole. To do this within their resources, HMRC have focused efforts on where the benefit is greatest. There are a wide range of potential applications, from issues that are clearly new to those which are almost without doubt. HMRC wants therefore to work in partnership with businesses and their representatives to ensure that as far as possible those issues brought forward for clearance are the ones that have the greatest impact on the business concerned. Developing a common understanding on this will be an ongoing process between HMRC and the users of the service.
The purpose of the new clearance service is to provide certainty for businesses operating in the UK, as a useful practical service at a level whereby speed of response from HMRC can be reasonably assured.
HMRC will therefore aim to provide clearances:
HMRC and users of the clearances service will recognise the need for proportionality from all sides so that applications are relevant, focused and within scope, thus avoiding overload of the service to the detriment of all concerned.
TopThis guidance sets out what you need to do to make an Inheritance Tax Business Property Relief clearance application, and what information you need to provide. It includes information for business owners in relation to Inheritance Tax Business Property Relief that was previously set out in Code of Practice 10.
Guidance on non-statutory clearances for business customers can be found on the HMRC website. Customers who would like advice on other personal tax issues should continue to refer to Code of Practice 10.
A non-statutory clearance is written confirmation of HMRC's view of the application of Inheritance Tax law and the Business Property Relief provisions, in relation to the tax position following a specific business transaction or event, that you can rely on in most circumstances, as their view of the tax consequences of this transaction.
HMRC will provide clearances in relation to Inheritance Tax Business Property Relief, regardless of the age of the legislation, where you have demonstrated that:
HMRC will aim to send you their view within 28 calendar days, though in complex cases this may take longer.
They will provide non-statutory clearances both:
HMRC will also provide their view of the tax consequences of a transfer of value that involves a change of ownership of a business (succession) where this transfer, leaving aside the application of Business Property Relief, would result in an immediate Inheritance Tax charge. Valuations are not included in the clearance service so they will apply some flexibility in borderline taxpaying cases. Evidence must be provided that the transfer is commercially significant and is genuinely contemplated.
Clearances in these succession cases will only remain valid for a limited period of six months. Applicants should recognise that the clearance service cannot be used for general confirmation of the Business Property Relief position in the absence of a commercial transaction.
Clearances do not alter the tax treatment but simply give you HMRC's view of what the correct tax treatment is.
You may wish to apply for clearance in relation to both business tax and Inheritance Tax. It is helpful if your applications are submitted separately to speed up the handling of these, but, if you prefer to write a joint application letter, you should send copies of the application to both clearance teams and ensure that it is clear from your letter which teams you have sent copies to.
There are a few statutes where tax law provides that HMRC will give a clearance relating to a specific point. These are referred to as 'statutory clearances' and they are outside the scope of this guidance.
For contact details and a comprehensive list of statutory clearances, please go to the link below. It is helpful if applications for non-statutory clearances are submitted separately to statutory clearances, to speed up the handling of your applications.
You may wish to write one clearance application letter to cover both non-statutory and statutory clearance applications, but you should ensure that copies are sent to all relevant teams. Where you choose to do this, please ensure it is clear at the front of your letter which teams copies of your letter have been sent to.
Seeking clearance or approval for a transactions
A statutory approval is different from a statutory clearance. Approval can be required in advance for a particular tax treatment to apply to a particular issue that can have wide reaching consequences, and the tax treatment changes according to whether an approval has been given or not. For example, statutory approval for the beneficial tax treatment of certain employee share schemes. For contact details on statutory approvals, please go to the link below.
Seeking clearance or approval for a transactions
TopClearance applications will be accepted from business owners and their advisers where there is demonstrable material uncertainty about the Inheritance Tax consequences of transactions affecting their business. HMRC do not intend this to encompass applications which clearly fall within other areas of personal taxation or routine product endorsements. Business owners may include individuals or trustees who will become business owners as a consequence of the transaction that is the subject of the clearance application.
The current service for other non-business customers continues. These customers should refer to the existing guidance in Code of Practice 10 or CAP1.
HMRC aim to make the guidance that accompanies their taxes legislation as clear as possible. If you feel that the guidance does not make clear how the legislation will apply in a particular situation you can make a non-statutory clearance application.
Please read the guidance on the legislation before applying for an Inheritance Tax Business Property Relief non-statutory clearance, and then read through the checklist in Annex A. The checklist will help you consider all the information that could be relevant to your particular application and to arrange the information so that HMRC can progress your application as quickly as possible. Please attach the checklist, completed as appropriate, with your application.
To discuss your tax affairs or get tax information, including a wide range of leaflets that explain different aspects of the tax system, please see the information contained in the Contact us area of our website.
In addition to non-statutory clearances HMRC makes available a wide range of information and advice to their customers. These are set out in Annex B. You may also wish to speak to your adviser.
Applications should be sent to:
HMRC
Trusts & Estates Technical Team (Clearances)
Ferrers House
Castle Meadow Road
Nottingham
NG2 1BB
Email: Trusts & Estates Technical Team (Clearances)
It will help if you quote the reference BP102/P1/08E.
HMRC will be able to process your application more efficiently if you send your clearance application by email. Attachments to emails should be no larger than 2 MB. Please don't send self-extracting zip files as the software will block them.
Using email:
Please attach the checklist in Annex A, completed as appropriate, along with the information and any supporting documents that explain your clearance application. If you do not email your application, please print the checklist as a cover page and send all the documents to the designated contact above.
HMRC recognise that many clearance applications contain commercially sensitive information and will handle all information included in clearance applications securely and in accordance with their legal obligations. Whether you send information electronically or on paper they will keep it secure, and not disclose it to anyone unless they are authorised to see it.
For an application that you consider particularly sensitive you may wish to notify HMRC in advance, so that we can agree about how best to submit your application. Please email IHT Technical Team (Clearances) with a contact name and telephone number and they will contact you.
TopFor a clearance to be binding on HMRC you must provide them, at the time the clearance is sought, with the full facts and context of the transaction, and set out the legislative uncertainty in question. The courts have said that the customer must 'put all of their cards face upwards on the table' (See Note 1). You are responsible for ensuring the information is correct, accurate and complete.
The information that you provide will depend on the circumstances of the clearance application. You need to decide what information is relevant to your application. Please include a heading to your clearance application that includes the name and address of the business owner and ensure that your application is clearly headed as a non-statutory business clearance application.
The checklist at Annex A and the guidance in this section will help you decide what to provide so that HMRC have the relevant information needed to process your application quickly. The guidance sets out guidelines as to the information to provide. They do not expect that all the information listed will be available or relevant for every clearance application. It minimises the burden for you and for them if you provide summaries of the relevant information, rather than a large volume of supporting documents.
Please supplement this with more detailed explanations, drawing attention to the relevant paragraphs in any supporting documents you provide.
Please set out this information at the start of your clearance application.
HMRC will need to understand who is carrying on the business, including:
It helps HMRC to handle the application efficiently if you set out the nature of your clearance request at the start - for example, in the heading or first paragraph. Please follow this with:
Please note that if the request relates to one specific part of a series of connected transactions HMRC expect you to provide a summary of the series of transactions as part of the facts about your transaction.
Please explain the context of the transaction and the reasons you are undertaking it, providing details of any connected transactions as appropriate. Please also:
Please set out your view of the tax consequences of the particular transaction, with a summarised explanation of your reasoning, and the full details of the question and issue on which you want a response. Please:
Note 1: The quote originates from R v IRC (ex parte MFK Underwriting Agencies Ltd) [1989] STC 873.
When submitting a non-statutory business clearance application for a transaction for which there is also the disclosure of an avoidance scheme which covers all or part of the transaction, it is important that explicit mention is made of any related disclosures, preferably by including a copy of the disclosure or, where available, by reporting the allocated DOTAS scheme reference number.
TopHMRC will acknowledge your application on receipt and, in most cases, send a full response within 28 calendar days. The response will either:
Where the interpretation is rejected, HMRC will set out reasons for this. Once a response is provided, you are entitled to act on the basis of their view, or on the basis of your own view of the appropriate tax treatment.
Very occasionally they may not be able to send a full response within 28 calendar days. This may be, for example, because the application is very complex and requires advice from a number of specialists within HMRC. Where this is the case they will tell you, and work with you to provide a response as soon as possible.
Sometimes HMRC may need to ask you to provide more information before a full reply can be sent. If they need to ask you for more information, the handling time will be suspended for your application until you are able to provide the information requested. They may wish to contact you by telephone for clarification, and it would help if you can provide a regular contact point during the period of your application.
HMRC will, as soon as possible after receipt of your application, either:
HMRC will not accept your application:
HMRC aim to send clear responses to the questions raised in your clearance application. They recognise that sometimes you may not agree with the response you receive, or you may not be happy with the service provided.
If you believe that they have failed to take account of some of the material facts set out in your application please contact the officer who dealt with your case (the details will be on the correspondence sent to you) and ask that they look at your application again. If you remain unhappy you can ask to be referred to the complaints manager.
If you are unhappy with the way they have handled your affairs, for example because of delays or mistakes, please tell the person or office you have been dealing with. If they are unable to sort things out, ask for your case to be referred to the complaints manager.
If you have applied for a non-statutory clearance, but have not received it by the time that an Inheritance Tax account is due to be submitted, then the account must still be sent in before the time limit. If that happens you should complete the account according to your own view of the correct tax treatment of the particular transaction. The normal interest and penalty rules will apply if an account is incorrect, whether or not the transactions have been the subject of a clearance.
If you disagree with the clearance that HMRC gave you and complete the account in accordance with your own view of the proper tax treatment, then it may turn out that you have not declared nor paid enough tax at the right time. Regardless of whether you had applied for a post transaction clearance or whether HMRC had given a clearance by the due date, any unpaid or undeclared tax carries interest in the normal way. Similarly, any overpaid tax carries repayment interest from the date it was paid wherever this is usually the case.
There is no general right of appeal against advice or clearances given by HMRC except where rights to appeal are set out in statute. For example, there is a right to appeal to the independent tax tribunal under Section 83 of the VAT Act 1994 about the amount of VAT chargeable on a specific supply of goods or services. An appeal under this section can only be made if the supply has taken place.
If you disagree with any appealable decision you have been given you should write to HMRC within 30 days. You can ask for the appealable decision you have been given to be reviewed or can appeal direct to the independent tax tribunal. More information on your rights to review and appeal are set out in the HMRC factsheet HMRC1: HM Revenue & Customs decisions - what to do if you disagree (PDF 56K)
TopA clearance applies to:
HMRC aim to provide clearances that will give certainty to business owners as to the Inheritance Tax Business Property Relief consequences of their transactions. Their starting point is therefore that you should be able to rely on any clearance provided. However for a clearance to be considered binding on HMRC, you must set out all the relevant facts and draw attention to all the issues in your application. HMRC expect businesses to interpret this relatively broadly, for example, by providing information on related transactions where relevant.
In many cases, Inheritance Tax does not arise as a consequence of the commercial transaction itself but of a later event if that event is a transfer of value. In these circumstances, our view of the application of Inheritance Tax law to the availability of Business Property Relief for a business, an interest in a business, certain shares and securities or certain business assets applies to the facts and circumstances existing at the date of the commercial transaction. HMRC will not be bound by a clearance they have given if there is a change in circumstances between the date of the commercial transaction and a later transfer of value. A change of circumstances includes a change in the nature of the business or the structure of the business, a change in the nature of the interest held by the person to whom the clearance application applies or a change in the legislation relating to Business Property Relief.
In cases where the commercial transaction is a change in the business ownership, any clearance given will be valid only for a period of six months from the date of the clearance letter.
If you intend to rely on a pre-transaction clearance in relation to a transfer of value, you should provide a copy of the clearance letter with the corresponding account or other relevant submission.
Under HMRC's existing powers of 'collection and management' (See Note 2), the principles of administrative law apply and the Courts will ultimately determine if HMRC are bound by a clearance they have given. The underlying principle is that HMRC has a duty to collect the correct amount of tax as required by statute. In the vast majority of cases a clearance they give will be correct in law and therefore binding. However there are some circumstances in which the primary duty to collect tax according to the statute may mean that HMRC can no longer be bound by a clearance given. For example this may occur where:
Note 2: Section 5 of the Commissioners for Revenue and Customs Act 2005.
There may be a small number of cases where HMRC provide a clearance that is incorrect in law. Where this happens, they will be bound by such advice provided that it is clear, unequivocal and explicit and you can demonstrate that:
Where this is the case, to apply the statute may be so unfair that it could amount to an abuse of power. But, where HMRC have given an incorrect clearance, their primary duty will always remain to collect the correct amount of tax as required by the law and therefore there will be some circumstances when they would not be bound by the advice they have given.
Where HMRC provide you with an erroneous clearance that is binding on them and subsequently notify you that it is incorrect, the established legal position (See note 3) is that you will only be required to start accounting for tax on the correct basis from the date of notification. For Inheritance Tax, this means that any transfer of value falling after an erroneous clearance has been corrected must be accounted for on the correct basis.
Note 3: See for example F & I Financial Services Ltd [2001] STC 939 and Al Fayed and others v Advocate General for Scotland [2002] STC 910.
TopPlease use the checklist for non-statutory clearance applications (PDF 21K) when deciding which documents to attach to your email application, or print and include as a cover sheet where you do not send it electronically.
Check that you have included information that is relevant and available for your clearance application and indicate with a tick items that are included. It helps us if you follow the order set out in the checklist in your clearance application letter and follow the same order in grouping any supporting documents.
TopIn addition to non-statutory clearances HMRC makes available a wide range of information and advice to our customers.
To discuss your tax affairs or get tax information, including a wide range of leaflets that explain different aspects of the tax system, please see the information contained in the Contact Us area of this website.
For general advice please contact the HMRC Helpline on Tel 0845 010 9000.
For general queries on IR35 intermediaries legislation, please contact Tel 0845 303 3535.
For general advice on other matters, please ring the Client Relationship Manager (CRM) or Customer Manager (CM) that handles your tax affairs. If you do not have an established contact within HMRC, then please visit the Contact us area for the number of an appropriate helpline. You will find it helpful if you prepare for the call by having to hand a clear explanation of your question and relevant details.
Please check the contact details provided.
Please check the contact details provided.
Please see a list of all HMRC statutory clearances and contact details .
Non routine publications that explain HMRC's interpretation of legislation and the way we apply the law in practice.
Relaxations of the law that give a reduction in tax liability that you would not be entitled to under the strict letter of the law.
Published on the HMRC Press Centre pages to announce proposed changes in the law or in HMRC practice, or any other changes or initiatives of interest to the public.
Public Notices are a range of publications in relation to VAT, Customs and Excise.
Revenue & Customs Briefs are regular publications which include announcements advising of policy changes resulting from legislation, litigation or internal policy reviews.
The internal guidance manuals HMRC staff use.
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