Chancellor Philip Hammond has written to the Office of Tax Simplification (OTS) to request a review of inheritance tax (IHT) with a view to simplifying the current regime. He stated that “IHT, and the system within which it operates, is particularly complex, and I would like to request that the OTS carry out a review of the IHT regime.”
Mr Hammond has also suggested that he would be interested to hear any proposals the OTS may have for simplification to ensure that the system is fit for purpose and the review should include a focus on the technical and administrative issues within IHT, such as the process of submitting returns and paying any tax due, as well as practical issues around routine estate planning and disclosure. As we understand it he has also asked the OTS to consider how current gift rules interact with the wider IHT system, and whether the current framework caused distortions to taxpayers’ decisions surrounding transfers, investments and other relevant transactions.
Since Mr. Hammonds letter a couple of weeks a go, the OTS has published more details about its review of inheritance tax (IHT) Among the issues the OTS says will be in scope are the process around submitting IHT returns and paying any tax, including cases where it is clear from the outset that there will be no tax to pay, and the various gifts rules including the annual threshold for gifts, small gifts and normal expenditure out of income, as well as their interaction with each other and the wider IHT framework.
The review will also look at other administrative and practical issues around routine estate planning, compliance and disclosure, including aspects of the probate procedure.
We understand the OTS will publish a report in the autumn offering specific simplification recommendations for the government to consider.
Certainly some exemptions such as the annual exemption, and the small gifts exemption for example have not kept pace with inflation and it is hoped that any review may recommend restoring these to more a more realistic level.
Simplification would be welcomed but, a review of the tax also needs to be treated with some caution as it could lead to changes that are not favourable, after all, one way of simplifying how certain reliefs work is to abolish them or limit availability!
Currently many opportunities exist to help you plan to mitigate your IHT exposure and therefore whilst the Chancellor and the OTS deliberate anyone considering IHT and estate planning may wish to seek advice on the options currently available before changes are made.
For more information or advice please contact:
t: 01245 254250
t: 01702 606842
t: 01245 254258
This is intended as a summary and overview of the tax situation and does not constitute financial advice and no action should be taken without first seeking professional advice specific to your circumstances.