Inheritance Tax Review Ordered by the Government
The Chancellor of the Exchequer, Philip Hammond, has recently written to the Office of Tax Simplification (OTS) requesting a review of the regime surrounding UK Inheritance Tax (IHT). He asked the review to focus on the technical and administrative issues with IHT as well as practical issues around routine estate planning and disclosure.The instruction for a review appears to reflect Mr Hammonds’ preferred considered and researched approach to policy decisions and his letter stated that he would be most interested in any proposals the OTS may have to make the experience of those who have Inheritance Tax issues as smooth as possible.Inheritance Tax was instigated well over 30 years ago and since then has evolved into a fragmented, complex and poorly targeted legislation. There have been calls for a reform of the system for most of its existence. In the last year alone HMRC received £4.84 billion in inheritance tax.Rising property prices and a static IHT threshold (which has remained at £325,000 since 2009) are the biggest drivers of this. The introduction of the Residence Nil Rate Band has caused a significant increase in legislation, increased complexity and caused more uncertainly to those looking to plan the distribution of their estate during their lifetime or on their death.Over the next couple of week the latitude of the review will be agreed. There are inextricable links between Inheritance Tax and Trusts, which themselves were referred to in the Autumn Budge last year. It is likely that there will be a review of the taxation of trusts at some stage in the near future.It seems probable that there won’t be any decision made before this years’ Autumn Budget. Experts suggest that substantial changes to the basis of the tax are likely to be forwarded looking and that existing structures may be offered some form of protection.Once the details of the review are available, industry professionals will be able gauge if this is merely an administrative review or whether it will extend to consider the valuable reliefs from tax, including Charitable exemptions, Agricultural and Business property reliefs and the treatment of Lifetime Gifts.If you’d like some professional advice regarding our own circumstances, please don’t hesitate to get in touch.