In January 2018, the Government invited the Office of Tax Simplification (OTS) to review inheritance tax (IHT).
The Government’s declared reason for this initiative is its concern at the level of hysteria surrounding the tax even though many more estates escape its provisions than are caught by them.
The Government insists that this exercise seeks to simplify what has been called the “customer journey” rather than to sneak in extra taxing opportunities; that said, bodies such as the Law Society (which represents the UK’s solicitors profession) have suggested that some reform may be desirable to achieve the overall aim of a simpler and fairer tax.
The Law Society has submitted the following proposals:
Ø HMRC should create and manage online forms for easier processing of inheritance tax information
Ø Either the introduction of a graduated rate of inheritance tax or the restoration of inflationary adjustments to the nil rate band
Ø Increasing the annual gifting exemption from £3,000.00 to £10,000.00 so that HMRC time is not wasted in monitoring modest lifetime gifts
Ø Repealing the Residence Nil Rate Band (which has been overcomplicated enough in the definition of its availability) and instead simply increasing the Nil Rate Band accordingly (as was the original intention behind the measure)
Ø Permitting the availability of Business Property Relief to furnished holiday lettings
Ø Abandoning the complexities associated with reconciling 18-25 trusts with changing HMRC priorities and instead extending the bereaved minor trust regime to age 25
Ø Retaining the spouse exemption but extending its application to include unmarried cohabitees
“My only concern with these proposals” says Frederick E Parkinson, Solicitor and Head of Private Client and Elder Law services at QualitySolicitors AcklamBond, “is that in its zeal to blunt the edge of inheritance tax for the more affluent south of England, the Law Society will end up ushering in the widening of the scope of the inheritance tax burden to include back into the regime estates that currently escape the tax altogether.
Care fees funding is enough of a burden for families in Lancashire to face having to bear without the added worry of suddenly being at the mercy of a deeply immoral taxation regime that taxes what are essentially accumulated savings that are already received net of income tax.”