Within the early hours of Friday morning (23 Nov), the Workplace of Tax Simplification (OTS) launched its first report reviewing Inheritance Tax (IHT). Ben Taylor, solicitor at Roythornes Solicitors, shares his preliminary ideas on the report and what it may imply for 2019.
Regardless of lower than 5% of UK estates being subjected to inheritance tax, it’s obvious from the report that many individuals are involved about it and not sure whether or not it applies to them. Actually, the report notes that IHT is seen as probably the most unfair of 11 main taxes and the method described as advanced, worrying and time-consuming.
While there may be clearly a notion that IHT applies extra usually than it really does, the report reveals that there’s an rising variety of individuals topic to IHT. The OTS places this right down to rising home costs and a freeze on the worth of the Nil Price Band (NRB).
An evaluation of HMRC information reveals that greater worth estates appeared to endure decrease charges IHT, which is put right down to elevated utility of reliefs. Relievable property corresponding to shareholdings and farm properties seem to make up the overwhelming majority of estates the place the worth exceeds £6 million however vital tax reliefs, such because the Agricultural Property Reduction (APR) and Enterprise Property Reduction (BPR), are allowed affecting the speed of tax.
While these reliefs don’t assist with the general public notion that IHT favours the rich, it’s value taking into consideration that they have been launched to make sure that a enterprise is affected as little as attainable by the dying of its proprietor. The enterprise will due to this fact proceed contributing to the financial system and never be damaged up by inheritance tax – which significantly applies to farming companies.
One other key function of the report associated to digitalisation. One of many principal suggestions by the OTS is for the federal government to introduce a totally built-in digital IHT reporting system which is unsurprising given the current concentrate on ‘making tax digital’. Nonetheless, it’s recognised that such a service would take time to implement so we may very well be anticipating a revision of the IHT types within the meantime.
The OTS additionally advisable that the method for tax fee be streamlined and consideration be given to extending the fee deadline. Once more, this isn’t shocking as the present time restrict of six months has been criticised by the general public and professionals alike.
The primary OTS report is extremely detailed and affords various suggestions. Provided that that is the primary of three reviews wanting into points affecting the IHT regime, I might be very stunned if we don’t see a substantial shake up of inheritance tax in 2019.