Chancellor asks for review of the inheritance tax system
The Chancellor, Philip Hammond, has asked the Office of Tax Simplification (‘OTS’) to review the inheritance tax system, aiming to make the system ‘fit for purpose’ and to provide a ‘smooth’ experience for anyone interacting with it. The complexity of the current inheritance tax regime, with its web of exemptions and reliefs, makes it difficult to navigate without professional assistance. The phased introduction of the Residence Nil Rate Band (‘RNRB’) has only added to the complexity. For more information on the RNRB, read our blog here.
So what might this mean for the future of inheritance tax?
At this stage there is little certainty. The OTS tax director, Paul Morton, has confirmed that the review will look at the system from the users’ perspectives as well from a legislative viewpoint. The OTS will also consider how other countries approach the issue, to learn about the widest range of options available. Stephen Herring, head of taxation at the Institute of Directors, highlighted that a review of inheritance tax would be best undertaken in conjunction with a review of capital gains tax as the two taxes often interact and overlap.
Initial reactions to the proposals were mixed with some concern that the real target is the removal of some of the existing inheritance tax reliefs. The Times reported that the review provides an opportunity to ‘crackdown’ on reliefs, making it harder for wealth to be passed down to the next generation. Others are more optimistic, including The Telegraph, who think that the review may result in a tax break or similar solution that will enable parents and grandparents to pass on large sums to future generations without incurring a hefty inheritance tax bill.
These conflicting predictions demonstrate the ambiguity at this stage. The Chancellor’s intentions are unclear.
The OTS published a document clarifying the scope of the review this month which can be found here. They plan to publish their report in the autumn of 2018.
We will keep an eye on how matters progress and keep you updated via this blog.
If you would like more information in relation to inheritance tax planning, Stephen Horscroft can be contacted on 01892 506 341 or at firstname.lastname@example.org.