Lords criticise profession over trusts

Lords criticise profession over trusts

House of Lords committee suggests needless worry may have been caused by scaremongering over the trusts issue

A Lords committee has criticised both the Treasury and the tax profession for
creating ‘needless upset and worry’, over trusts.

A report out today criticises the Treasury’s failure to consult on its
wide-ranging crackdown on tax avoidance using involving interest in possession
and accumulation and maintenance trusts.

Peers on the Economic Affairs Committee, which by convention criticises
technical aspects of tax law changes rather than the substantive decisions, also
voiced concern at the lack of clarity about the government’s objectives in the
immediate aftermath of the spring budget.

There was criticism of the accounting, tax and trust professions which ‘may
have indulged in exaggerated scare-mongering’ over the extent of the proposals,
warning that clumsy handling of the issue by both sides ‘needlessly upset and
worried’ a lot of people.

The committee said that while it welcomed the fact that the government had
responded to representations by tabling amendments to the finance bill, ‘we
believe that neither the process of introducing these tax changes with a lack of
consultation nor the low-key way in which both the original proposals and these
amendments were released is the way in which tax changes should be made.’

There were initial claims that over a million wills would need to be reviewed
and re-written because of the crackdown, but these were denied by HM Revenue
& Customs which said the claim would affect only a small number of very
wealthy people.

The committee ‘remains concerned at the extent of the disagreement between
HMRC and the professional bodies and the accompanying lack of certainty, and at
the possible implications for the costs for ordinary family businesses.’

Treasury witnesses made it clear their concern had been about forestalling
and the rapid adaptation of arrangements if it had been known what was about to
happen.

But members believed other measures could have been taken to prevent this.

The committee said: ‘We are very firmly in favour of consultation and
recommend that, if clarity, certainty and simplicity are to be achieved, in
principle it should take place on all occasions where there is any significant
technical content.’

Chairman Lord Wakeham, a former Tory Treasury minister, said: ‘A lot of
people have been needlessly worried by the original proposals, and there might
have been little need for amendments if the government, before introducing the
measures, had consulted on them in such a way as to make clear its objectives in
countering tax avoidance.’

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