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IHT review

The Chancellor, Phillip Hammond, has asked the Office of Tax Simplification (OTS) to review inheritance tax (IHT), with a focus on simplification, ensuring the regime is fit for purpose and to make the experience of those who interact with it as smooth as possible.

The OTS identified IHT last year as one area it particularly wanted to tackle. The review is set to be wide ranging and will focus on the technical and administrative issues within IHT, such as the procedure for submitting returns and paying any tax due, as well as practical issues around routine estate planning and disclosure. There is no suggestion that this is a revenue raising exercise and it seems to be more about process than anything else. However, Mr Hammond has suggested a "look at how current gift rules interact with the wider IHT system and whether the current framework causes any distortions to taxpayers' decisions surrounding transfers, investments and other transactions".

As the Chancellor noted, IHT is "particularly complex" and so any genuine simplification has to be welcomed, provided that fairness is also maintained. Two areas which would benefit from simplification include the recently introduced residence nil rate band and the IHT regime for trusts.

We will know more about the precise scope of the investigations when the terms of reference are agreed in the coming weeks. It will be interesting to see how this ties in with the government's planned consultation on how to make the taxation of trusts “simpler, fairer and more transparent”, announced at the Autumn Budget. The consultation and OTS review taken together could lead to real change, although this is at least a year away.

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