Skip to content

Ideas for IHT reform

The Office of Tax Simplification (OTS) has now published a 'call for evidence' relating to the review of inheritance tax requested by the Chancellor, Philip Hammond. The review is wide-ranging and asks what can be done to improve process and 'customer experience'. It also asks about the rules on making gifts and there is a detailed focus on both agricultural and business property relief (APR and BPR). This is slightly surprising after these reliefs were so recently the subject of an independent review commissioned by the government, which concluded that they seem to be working as intended.

The OTS is also looking at the 'bigger picture' and asks whether IHT should be replaced with an alternative form of wealth tax. On that question, a think tank has suggested fairly radical proposals to address intergenerational inequality and unfairness. The Resolution Foundation suggests that IHT is scrapped in favour of a tax on recipients of both lifetime gifts and bequests. They propose to keep the spouse exemption but everyone else would have a lifetime tax-free receipts allowance of £125,000 and any gifts or inheritances above that would be taxed at 20%, or 30% if the receipts exceed £500,000. The aim is to encourage people to spread their wealth more widely and to reduce opportunities for avoidance. Despite lower marginal rates, they estimate that this would raise £5b p.a. more than IHT if introduced in 2020/21.

It is an interesting idea but one that seems likely to be too radical in the current climate. However some of their other suggestions such as reviewing the CGT uplift on death and tightening up APR and BPR are also areas which the OTS is actively considering. Interestingly, the Resolution paper acknowledges that trusts are already heavily taxed and do not play a particularly big role in the avoidance of IHT. We must wait to see how the OTS and the forthcoming trust review are influenced by reports such as this, which has certainly generated some publicity.

We will be responding to the call for evidence and will report further on the OTS recommendations expected in the Autumn.

How to find us:
London Bankside

Bankside Office

240 Blackfriars Road
London
SE1 8NW
DX 53 Chancery Lane

Telephone: +44 (0)20 7629 7411
Fax: +44 (0)20 7629 2621
Email: bh@boodlehatfield.com

London Mayfair

Mayfair Office

6 Grosvenor Street
London
W1K 4PZ

Telephone: +44 (0)20 7629 7411
Fax: +44 (0)20 7629 2621
Email: bh@boodlehatfield.com

Oxford

Oxford Office

6 Worcester Street
Oxford
OX1 2BX

Telephone: +44 (0)20 7629 7411
Fax: +44 (0)20 7629 2621
Email: bh@boodlehatfield.com

Bankside Office

240 Blackfriars Road
London
SE1 8NW
DX 53 Chancery Lane

Telephone: +44 (0)20 7629 7411
Fax: +44 (0)20 7629 2621
Email: bh@boodlehatfield.com

Get directions

Contact us