The Office of Tax Simplification (OTS) have published ‘Inheritance Tax Review: Call for evidence’, alongside an online survey which seek to gather data about IHT experiences and perceptions.
As part of a review of IHT, the OTS will be publishing a report in Autumn 2018 which will evaluate aspects of the current IHT regime, and identify areas where IHT can be simplified.
The OTS have published a call for evidence and an online survey to help gather the required data for the report. This looks at various aspects including:
- Forms, administration and probate.
- Estates covered by the Nil Rate Band.
- Chargeable Lifetime Transfers and Trusts.
- Business Property Relief.
- Agricultural Property relief.
- Charitable giving.
The deadline for responses and the survey is 8 June 2018. Responses can be sent to
The consultation questions are:
Payment and forms
1. If you have completed an IHT form, please state which form(s) you completed and whether you completed them in your professional or individual capacity. Please describe any problems you had in navigating the form(s) and provide any suggestions you have on how the forms or related guidance could usefully be simplified, made clearer or made easier to complete.
2. In general, the deadline for payment of IHT is 6 months after death, whilst the deadline for submitting the relevant IHT form is 12 months after death. Please describe any problems or issues that arise because of this.
3. In general, IHT forms must be processed by HMRC, and IHT must be paid, before probate is granted and the estate can be distributed. The benefit of this mechanism is that it ensures that IHT is generally paid before assets are distributed to beneficiaries, which avoids any need to recover the tax later.
Does this process create practical difficulties? Bearing in mind the benefit of this mechanism, what could be done to address any such difficulties? To what extent does the instalment payment option where the IHT is attributable to certain assets in instalments help mitigate any issues?
Estates that do not have to pay IHT
4. Are there any disproportionate administrative or compliance burdens in establishing whether the value of the estate is below the NRB, or where the spouse exemption applies? How could these be reduced?
5. Could the guidance on www.gov.uk be improved to support people handling estates on which no IHT will be paid? If so, how?
6. Are there other steps that government could take to raise awareness of the NRB to reduce anxiety around liability to IHT for people who don’t have to pay it?
Administering an estate, record keeping and valuations
7. What, if anything, could be done to help executors administer an estate and fulfil their obligations?
8. Have you been required to obtain a valuation of assets for the purposes of completing an IHT form? Was there any difficulty in doing so? Was the cost of the valuation commensurate with any IHT payable? What could be done to simplify this process?
Lifetime gifts to individuals
9. Are there any aspects of the interaction between the thresholds and exemptions relating to lifetime gifts that you find especially distortive or complex to understand and apply? Please provide examples.
10. How, if at all, should these rules be simplified? What could be done to improve public understanding of the rules? Have you found that the joint liability of the estate and the person receiving the gift can cause problems for executors or HMRC?
11. How, if at all, could the monetary thresholds and the various lifetime exemptions be simplified?
12. How, if at all, does the IHT framework, including the related tax considerations set out above, make business decisions challenging? For example, does it affect or distort decisions regarding:
a) whether to sell or transfer a family business to another vehicle or directly to the next generation during lifetime or wait until death,
b) the structure of the business (for example, how to hold non-trading assets),
c) the choice of business vehicle (for example a corporate entity, partnership, unincorporated business), or
d) investment in unlisted trading companies (including those traded on the alternative investment market (AIM))?
13. Do the different requirements for trading across BPR, CGT gift relief and entrepreneurs’ relief cause complexity and, if so, how could this be addressed? Are there any other inconsistent definitions or approaches either within IHT, or across IHT and CGT and if so, does this cause complexity? Do you have any other suggestions as to how to remove complexity around the interaction between CGT and IHT?
14. The availability of BPR is not generally dependent on the size of a person’s interest in a business or holding it for any period after death. Does this feature of BPR add to or reduce complexity?
15. How, if at all, does the IHT framework, including related tax considerations set out above, make business decisions challenging? Does it affect or distort decisions regarding:
a) whether and when to sell or transfer the farm to another vehicle or to the next generation, or downsize during one’s lifetime, or wait until death,
b) the choice for farm owners of letting out farmland versus farming themselves or via a contract farming arrangement,
c) the inhabitants and use of the farmhouse,
d) the choice of business vehicle for the farm (for example a corporate entity, partnership, unincorporated business), or
e) the structure of the business (for example, how to diversify or hold non-trading assets)?
16. Could the criteria for being a farmhouse or the process of determining the agricultural value of the farmhouse be simplified? If so, how?
17. What, if any, complexities arise from the fact that BPR and APR overlap, at least in part? Are there discrepancies in the way that they operate? Would it help if APR was replaced by BPR or if the two were merged?
18. How well do you think the charitable exemption and the lower rate of tax on death is understood by advisers or the public? Please tell us about any areas of complexity in the application of this rate, or the charitable exemption, along with any suggested improvements.
Other areas of complexity
19. Please tell us about any other areas of complexity in applying any IHT rules, reliefs or thresholds not already mentioned in your response, along with any suggested improvements. You may, for example, wish to comment on the residence nil rate band, the IHT treatment of trusts, the IHT treatment of personal pensions and life insurance products, or the conditional exemption for certain works of art or heritage assets.
Wider IHT system
20. Do you think that the IHT system should be reformed more widely to simplify it? If so, how? Should some IHT exemptions be removed to fund a lower or graduated rate or a higher NRB? If so, which ones? Are there any useful lessons that could be learned from other countries? If so what, and from which countries?