Chancellor calls for Inheritance Tax review to make regime “fit for purpose”
The Chancellor, Philip Hammond, has asked the Office of Tax Simplification (OTS) to undertake a review of the Inheritance Tax (IHT) system to ensure that it meets the needs of modern households.
In a letter to the OTS, an independent branch of the Treasury, Mr Hammond said that the current system is “particularly complex” and that he wants the OTS to find new ways of simplifying it.
He wants the review to look at the technical and administrative issues that make IHT so complex and wants the OTS to see if changes can be made to the process of submitting returns and paying any tax due to aid estate planning and disclosure.
Mr Hammond said: “I would be most interested to hear any proposals you may have for simplification, to ensure that the system is fit for purpose and makes the experience of those who interact with it as smooth as possible.”
The Chancellor’s letter also singled out the current gifting rules and how they relate to the wider IHT system.
In the 2016/17 tax year, HM Revenue and Customs received £4.84 billion in IHT. In recent years its take of IHT has grown as property prices have risen, but in 2017 new rules – the Residence Nil-Rate Band – were introduced to allow a larger proportion of property wealth to be passed on to direct descendants.
Some experts are concerned that unless the Government reduces the amount it collects in IHT – which they feel is unlikely – they may instead make certain allowances/exemptions less generous under the guise of simplification.