EXPLANATORY NOTE

1. This clause introduces a new procedure for the Inland Revenue to seek from any person liable to deliver an inheritance tax account, such information, documents etc as may reasonably be required for specified purposes including enquiring into the account. The accountable person will have a statutory right of appeal against the information notice issued under this procedure.

2. The change will apply from the date of Royal Assent to the Finance Bill.

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3. The clause inserts new sections 219A and 219B after section 219 of the Inheritance Tax Act 1984 ("IHTA").

4. New section 219A provides a new procedure for the Inland Revenue to obtain information from anyone who is liable to deliver an inheritance tax account under existing sections 216 or section 217 IHTA.

Subsection (1) enables the Inland Revenue to issue a written notice to any person who has delivered, or is liable to deliver, an inheritance tax account under section 216 or 217 IHTA, seeking information within the time specified in the notice. The information that may be sought covers:

(a) documents that are in the accountable person’s possession or power and which are reasonably required for any of the purposes specified in subsection (2) of the new section; and

(b) such accounts or particulars as are reasonably required for those purposes.

Subsection (2) sets out the purposes for which information may be sought. These are:

(a) enquiring into an inheritance tax account and any claim or election included in it;

(b) deciding whether the account is incorrect or incomplete; and

(c) deciding any inheritance tax matter by a formal notice under section 221 IHTA.

Subsection (3) allows the accountable person to provide photographic or facsimile copies of any documents requested in the information notice issued under the new procedure.

Subsection (4) enables the Inland Revenue to issue a further notice seeking the original of any copy document produced following a previous notice under the new procedure.

Subsection (5) requires that the accountable person must be given at least 30 days within which to comply with the notice, or further notice, issued under the new procedure.

Subsection (6) permits the Inland Revenue to take copies of, or make extracts from, any document produced under the new procedure.

Subsection (7) allows the accountable person to withhold any information sought under the new procedure that relates to the conduct of any pending appeal by him/her.

5. New section 219B gives the accountable person a statutory right of appeal against a notice issued under new section 219A(1).

Subsection (1) allows the accountable person to appeal against an information notice issued under new section 219A(1).

Subsection (2) provides for existing provisions on inheritance tax appeals to apply to any appeal against the information notice. The effect generally will be that the accountable person’s appeal will be heard before the Special Commissioners.

Subsection (3) requires any appeal against the information notice to be made within 30 days from the date of the notice.

Subsection (4) provides that, on an appeal against the information notice, the Special Commissioners may:

(a) confirm the notice if, or to the extent that, they are satisfied that the production of the document, account or particulars concerned was reasonably required by the Inland Revenue for any of the purposes mentioned in new section 219A(2); or

(b) set aside the notice in relation to any requirement as to which they are not so satisfied.

Subsection (5) deals with the situation where the Special Commissioners decide the appeal by confirming the notice in relation to any requirement. It allows the accountable person 30 days from the date of the decision to comply with that requirement.

Subsection (6) provides, in effect, that neither the Inland Revenue nor the accountable person can appeal against the Special Commissioners’ decision to the High Court. In other circumstances, section 225 IHTA allows an appeal to the High Court on a point of law.

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6. Inheritance tax (IHT) was introduced in 1986 to replace capital transfer tax. In general, IHT is charged on the value of the assets in a person’s estate at the time of his/her death and of any chargeable gifts or transfers made by the deceased within the previous seven years. Most other lifetime gifts count as potentially exempt transfers (PETs) There is no immediate IHT charge on a PET when it is made and the PET becomes exempt from IHT once the person making the gift survives for seven years. There are special provisions on lifetime gifts where the donor reserves or receives any benefit in relation to the gifted asset.

7. The current provisions on the administration and collection of IHT are to be found in Part VIII (sections 215-261) of the IHT Act 1984 (IHTA).

8. Under existing law (section 216 IHTA) any person who is liable for IHT on a transfer is required to deliver an IHT account with details of the asset to which the transfer relates and its exact value. If the accountable person discovers any defect in the account already delivered, he/she is required to deliver a corrective account to remedy the defect (section 217 IHTA).

10. There are procedures (in section 221 IHTA) for the Inland Revenue to make a formal determination of matters relating to an IHT transfer. These include the value of the transfer and the amount of any IHT chargeable on it. The person receiving a notice of determination has a statutory right of appeal (section 222 IHTA). This has to be exercised within 30 days of the date of the notice.

11. Appeals on matters relating to IHT usually go to the Special Commissioners, or ‘Commissioners for the special purposes of the Income Tax Acts’. Appointed by the Lord Chancellor, the Special Commissioners form an independent statutory tribunal to hear appeals and other proceedings against decisions of the Inland Revenue. Either party to an appeal before the Special Commissioners may appeal, on a point of law, against their decision to the High Court.

Clause 94 introduces a streamlined procedure for obtaining information from people who are themselves liable to deliver inheritance tax accounts under existing legislation. Under the new rules, an information notice may be issued without a Special Commissioner’s prior consent but the accountable person will have a right of appeal against the notice.