30 Jul 2017 Inheritance Tax Changes Afoot?
As part of their summer reading, MPs have been given a 51-page briefing paper on Inheritance Tax which includes:
- A summary of the structure of the tax.
- Details of proposals to reform Inheritance Tax over the last 20 years.
- The 2007 reforms with the nil rate band allowance for couples being transferable where death was after 9 October 2007.
- The Coalition Government’s approach (2010-2015), which was of no significant change, although the nil rate band allowance was “frozen” at £325,000 from 2009.
- Recent developments, which most significantly included an additional residence nil rate band (see Additional Inheritance Tax relief for residences) which was introduced where death was after 5 April 2017.
The briefing paper discusses historic debates about the reform of Inheritance Tax, including:
- Whether Inheritance Tax should be abolished; and
- Whether Inheritance Tax should be charged on the recipient (rather than the donor).
The paper also repeats comments from the 2011 Mirrlees report and subsequent briefing notes that “there are substantial reliefs, such as for agricultural land and unquoted business assets, that are hard to justify and make the tax easier to avoid.”
Although the basic principles and method of computation of Inheritance Tax have been in place since 1986, the tax has evolved, especially with regard to the treatment of trusts. It might be the case that a government dealing with the changes required for Brexit will have sufficient legislation that it needs to carry through Parliament. But it may be that with “middle England” mollified with the phasing in of the residence nil-rate band, the government might look to raise some tax from other changes to the Inheritance Tax system.
With no explanation given as to the purpose behind the paper, it may be reasonable to anticipate a review of Inheritance Tax in the autumn Budget, although it is to be hoped that significant changes will be discussed before being introduced.
If you have any queries, please contact your usual consultant or Caroline Lovibond on 01865 261100 ([email protected])