Wife inheriting shares with capital gains

Gordon Gekko said:
Revenue would be laughed out. But it would never happen.
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Oddly enough, we received consultant-level advice a number of years back on the case of a taxpayer who had received a sizeable and unexpected inheritance of a farm from the estate of a farmer sibling, and the only way he could conceivably qualify for agricultural relief was if he divested himself before the valuation date of his half-share in the family home, in favour of his wife.

We were told it would never wash with Revenue.

Were we misled?
 
Brendan Burgess said:
Hi Tommy

It's not really your definition or Gordon's definition.

It is what sort of transactions which spur Revenue to invoke the legislation.

I very much doubt that they would pursue a widow because she transferred €300k worth of assets to her dying husband and saved €100k CGT.

They might do it if it were a transaction of €100m.

Brendan
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Hmmm! Making a call as to whether Revenue will catch you. I think this arises a lot with CAT. I have heard third hand of advisors saying "look the chances of Revenue chasing down this gift for a deposit in say 20 years' time is remote". This is a bit of an ethical conundrum. Presuming they are right shouldn't they advise their clients of that reality, albeit leaving it to their own (or indeed their dependants') conscience whether they declare it.
 
Hi Duke

Just to be clear I am not recommending illegal tax evasion. It is wrong whether the chances of being caught are low or high.

This seems to be a full legitimate tax planning activity. I am just pointing out that even if Revenue knows about it they are very unlikely to take any action.

The anti-avoidance legislation is for other purposes as discussed here

Has anyone any experience of Section 811 anti-avoidance legislation?

This has come up a few times on Askaboutmoney where what appears to be reasonable tax planning is questioned on the grounds that Revenue has wide powers under Section 811 to express an opinion that the transaction is artificial. This example triggered this post. I can't find much online about...
www.askaboutmoney.com
 
Duke of Marmalade said:
Hmmm! Making a call as to whether Revenue will catch you. I think this arises a lot with CAT. I have heard third hand of advisors saying "look the chances of Revenue chasing down this gift for a deposit in say 20 years' time is remote". This is a bit of an ethical conundrum. Presuming they are right shouldn't they advise their clients of that reality, albeit leaving it to their own (or indeed their dependants') conscience whether they declare it.
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That’s dishonest tax evasion though, so totally different, and not really a conundrum at all.
 
T McGibney said:
Oddly enough, we received consultant-level advice a number of years back on the case of a taxpayer who had received a sizeable and unexpected inheritance of a farm from the estate of a farmer sibling, and the only way he could conceivably qualify for agricultural relief was if he divested himself before the valuation date of his half-share in the family home, in favour of his wife.

We were told it would never wash with Revenue.

Were we misled?
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I can’t comment on the specifics of the case, and I don’t know what ‘consultant level’ means either. Perhaps the facts of that case had some nuance to them?

But it does beg the question why Big 4/5 and Private Client legal advisers routinely structure Wills in a way that enables people to avail of reliefs such as Agricultural Relief by giving them time to meet the relevant criteria.

So, on balance, I would say that you were misled, yes.
 
Gordon Gekko said:
I can’t comment on the specifics of the case, and I don’t know what ‘consultant level’ means either. Perhaps the facts of that case had some nuance to them?
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Consultant-level means a tax consultant was hired to advise.
There wasn't much nuance to it. The dilemma was pretty much as I described above.

Gordon Gekko said:
But it does beg the question why Big 4/5 and Private Client legal advisers routinely structure Wills in a way that enables people to avail of reliefs such as Agricultural Relief by giving them time to meet the relevant criteria.
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Why? The legislation specifically allows this.
Gordon Gekko said:
So, on balance, I would say that you were misled, yes.
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I'm pretty sure we weren't. The client was happy that the advice we received was sensible.
 
Brendan Burgess said:
I very much doubt that they would pursue a widow because she transferred €300k worth of assets to her dying husband and saved €100k CGT.

They might do it if it were a transaction of €100m.
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So you are saying that the Revenue have a call on what is tax evasion and can be influenced in that call by the personal circumstances of the taxpayer?
 
Not at all.

Tax evasion is a criminal offence.

Tax planning is perfectly legal.

Aggressive tax planning might fall foul of Section 811 but I don't think it's classified as tax evasion.

Brendan
 
T McGibney said:
Consultant-level means a tax consultant was hired to advise.
There wasn't much nuance to it. The dilemma was pretty much as I described above.


Why? The legislation specifically allows this.

I'm pretty sure we weren't. The client was happy that the advice we received was sensible.
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So, in simple terms, was the advice you received that Revenue ‘wouldn’t like’ a taxpayer divesting himself of non-Agricultural Property prior to an inheritance of Agricultural Property with a view to claiming Agricultural Relief?
 
Gordon Gekko said:
So, in simple terms, was the advice you received that Revenue ‘wouldn’t like’ a taxpayer divesting himself of non-Agricultural Property prior to an inheritance of Agricultural Property with a view to claiming Agricultural Relief?
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No. Didn't you read what I wrote?

Every student knows that's eminently possible.

The issue here was subtly different.

It made no sense for him to divest himself of his share of the family home in the absence of a tax advantage.
 
T McGibney said:
No. Didn't you read what I wrote?

Every student knows that's eminently possible.

The issue here was subtly different.

It made no sense for him to divest himself of his share of the family home in the absence of a tax advantage.
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Yes, I did read what you wrote.

I’ll ask again, was it as simple as the individual divesting himself of certain assets in order to make himself eligible for Agricultural Relief?

It’s impossible to give a definitive view without knowing the nuance of the case, and the fact that the testator was already dead may have had an influence, but I’d stand by the view that it sounds like you received poor, lazy advice. In my experience, weaker tax consultants wave the ‘Revenue won’t like that’ flag. The likes of KPMG or the big legal firms give proper technical advice and don’t bluster about general anti avoidance.

Those ‘point in time’ tests for certain reliefs and exemptions are just that, you need to meet the criteria on the day. And saying ‘I transferred the property to get the relief’ is perfectly fine because that’s not a ‘misuse or abuse’ of the relief or abatement. The legislature decided that in order for someone to get X relief, they needed to meet Y & Z criteria. End of.

General anti avoidance would only kick in if some clever adviser found a gap in the wording where the taxpayer could flout the rules or apply the Gregorian calendar instead of the tax year or something equally creative and far from what was intended.
 
Whatever. Neither we nor the client were ultimately unhappy with the advice given. The man had no real appetite to surrender his share of the family home.
 
T McGibney said:
Whatever. Neither we nor the client were ultimately unhappy with the advice given. The man had no real appetite to surrender his share of the family home.
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Ah, so it’s an irrelevant straw man argument.

Some unnamed tax consultant advised a client of yours who didn’t want to transfer his share in the family home to his wife that he shouldn’t transfer it.

Fair enough.
 
@Gordon Gekko is 100% correct here - this is all about the distinction between tax planning and tax avoidance; the first entails taking steps to secure the benefit of reliefs / exemptions as they're intended to apply, and the other involves artificial, highly contrived series of steps / transactions to obtain the benefits of reliefs/exemptions in a way that constitutes a misuse or abuse of the relief, having regard to the purpose of the relief.

What was being described here is simply tax planning - there's nothing artificial or abusive about transferring an asset to a spouse to secure a more favourable tax treatment.
 
I always thought that the Revenue could do nothing about tax avoidance but tax evasion was a different story. Depending on your advices - for I do respect you! - I may have to revisit this belief!!

If, someone performed the highly contrived series of steps as you've described, the implication of your posts is that this is tax avoidance and that the Revenue could do something about it! It follows that tax evasion is never ok and tax avoidance may or may not be ok! Have I got this right?!:)
 
jasdpace@gmail. said:
I always thought that the Revenue could do nothing about tax avoidance but tax evasion was a different story. Depending on your advices - for I do respect you! - I may have to revisit this belief!!

If, someone performed the highly contrived series of steps as you've described, the implication of your posts is that this is tax avoidance and that the Revenue could do something about it! It follows that tax evasion is never ok and tax avoidance may or may not be ok! Have I got this right?!:)
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I think you need to reread the entire thread!

Tax planning is fine - this means structuring your affairs in order to minimize your tax exposure, or maximize the utilization of reliefs, or in this case transferring assets to the spouse that is expected to die first (although anyone can be struck down at anytime, nobody knows when their number will be up).

There's a spectrum, with things like maxing out your pension contributions, or gifting your kids 3k a year, at the benign end of the spectrum.

At the other end of the planning spectrum is highly aggressive planning, or tax avoidance, which involves elaborate schemes designed purely to engineer a desirable tax outcome through obtaining a relief or exemption in a way that the people passing the legislation would not have intended or foreseen. Such actions aren't illegal, as they adhere to the letter of the law, but are contrary to the spirit of the law. That is why there are both specific anti-avoidance provisions and general anti-avoidance provisions, to allow Revenue to counter aggressive schemes to avoid tax.
 
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