Inheritance Tax – general simplification review

Inheritance Tax – general simplification review

Further to the Chancellor’s request for the Office of Tax Simplification (OTS) to review Inheritance Tax, the OTS has published a short scoping document advising that it will publish a report in the autumn of 2018 that is to consider how key aspects of the current Inheritance Tax system work, both administrative and technical, and whether and how they might be simplified.

Of particular concern for farmers and landowners will be that the review is to explicitly consider the “complexities arising from the reliefs and their interaction with the wider tax framework”.

The OTS are to also to consider “The scale and impact of any distortions to taxpayers’ decisions, investments, asset prices or the timing of transactions because of the Inheritance Tax rules, relevant aspects of the taxation of trusts, or interactions with other taxes such as capital gains tax”.  There has been a much anecdotal comment about farmland prices being supported in part due to the availability of Inheritance Tax reliefs.  However, Business Property Relief is available to all trading businesses, not just farms.

With the focus being on simplification, landowners may do well to consider whether property that currently qualifies for Agricultural Property Relief would be treated similarly if only Business Property Relief were available, and if not, what action might be advisable.

The review will also:

  • Provide an initial evaluation of aspects of the current Inheritance Tax regime, and what they mean for taxpayers, HMRC and the Exchequer;
  • Identify opportunities for simplification of Inheritance Tax supported by analysis and evidence; and
  • Offer specific simplification recommendations for government to consider.

This will also include consideration of a combination of administrative and technical questions such as:

  • The process around submitting Inheritance Tax returns and paying any tax, including cases where it is clear from the outset that there will be no tax to pay;
  • 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 Inheritance Tax framework;
  • Other administrative and practical issues around routine estate planning, compliance and disclosure, including relevant aspects of probate procedure, in particular in relation to situations which commonly arise; and
  • The perception of the complexity of the Inheritance Tax rules amongst taxpayers, practitioners and industry bodies.

As this is an initial evaluation, it is likely that more detailed work or HMRC consultations will be requested if the Government wishes to progress specific measures, with it being noted that the Chancellor is responsible for final decisions on tax policy.

A copy of the OTS scoping document can be found here.

If you have any queries, please contact your usual consultant or Carlton Collister on 01993 886418 or carlton@landtax.co.uk.