Brevity can be the enemy of accuracy
1 The gift by H to W must transfer beneficial ownership and unfettered freedom to dispose of the half share. As this essential validity is a point of law a statement of that objective by the parties is not conclusive but desirable (and not just in an adviser’s letter).
2 Section 268 can determine whether a transfer of value has occurred at all but here its key function is to identify the transferor for IHT purposes of W’s share to S.
As a dinosaur I prefer to be taxed by law not untaxed by Manual but IHTM 14833 is potentially helpful and refers to a Ministerial statement for support.
There are two doubts:
(a) the word “unconditionally”. This does not mean only a gift conditional in law. It indicates HMRC’s acceptance that what they call the “subjective test” in subsection (1) (b) does not apply to a set of given facts. The use of the shorthand “intention” is unfortunate. It would be absurd for HMRC to be addressing only the unlikely situation where the gift to the “third party” (S here) was unexpected and fortuitous. It must cover a situation in which H is aware, expecting, “intending” and even hoping that the W-S gift may be made. H should have no involvement in that gift.
(b) there is a vague caveat about “a more complex series of transactions” so ideally both gifts will be plain vanilla
In order to open a credible future JR argument H should confirm in writing ahead of the gift that he is aware of IHTM14833 and relies on it.
3 The Manual statement pre-dates the GAAR. It would surprise me if the arrangements were ultimately found to be “abusive” as defined in s 207 FA 2013, though they are not "approved " by an example in Guidance Part D. Under s211 (3) it would be admissible at discretion.
4 The PCRT must be considered as its authors have the power to deprive us of our livelihood. Paragraph 3.2 concerns “advising on tax planning arrangements”. It is plainly in terrorem. The SRA in its Warning Notice about duty and tax avoidance endorses it, though the Law Society does not unless a solicitor is also a member of a PCRT body.
Both pronouncements have been expertly critiqued by Michael Blackwell at 1 BTR 2019 as being contrary to the rule of law; insofar as they ordain selective denial of the right to legal advice, a branch of the same tree of justice as legal advice privilege.
I do not accept that paragraphs 1-3 above offend against these dubious and intimidatory exhortations to irrefutable virtue.
5 I acknowledge a solemn professional duty of integrity, to the public and in my dealings with HMRC; and an obligation to avoid its subornation by my other solemn duty to my client. I do not accept an overriding nebulous duty to a disembodied Tax System, requiring me to triage metaphysically my client’s proposed activities, though lawful inclusive of the GAAR. It is not the GDR.
That system can be a monster as the two Lobler cases show. The taxpayer’s apparently logical and straightforward action caused a tax disaster, which had to be rescued by the UT pulling the exotic remedy of rectification out of a hat, and the later specific change in the law out of shame speaks volumes. I believe he would have been entitled to be advised of that outcome and, more to the point, on any available means within the law inclusive of the GAAR to avoid it.
An adviser is free, subject to equality law and the cab rank (for some), to reflect their distaste for tax avoidance (which Blackwell avowedly shares) by framing an exclusion in their retainer/letter of engagement. If very many do Blackwell’s theorem on the rule of law will be QED.