The chancellor has written to the Office of Tax Simplification (OTS) acknowledging its interest in the inheritance tax (IHT) regime and asking it to carry out a review.
The chancellor is particularly interested in proposals for simplification with a focus on technical and administrative issues, as well as practical issues around estate planning and disclosure. The review could also look at how the current gift rules interact with the wider IHT rules and whether the current framework distorts taxpayers’ decisions. Full details are in the chancellor’s letter to the OTS.
The terms of reference are to be agreed in the coming weeks. As yet we do not know the timetable.
There is no mention that the OTS is charged with increasing the tax take; indeed, that is not the OTS’s role. That said, it is to be expected that business property and agricultural property reliefs will be looked at to ensure they are hitting the intended target and not being abused.
The annual exemption of £3,000 and small gift relief of £250 have not been increased for many years, and while we have the potentially exempt transfer regime it could be argued they are not needed.
A good target for simplification has got to be the residence nil rate band introduced by the previous chancellor.
It is not clear how this review of IHT will tie in with the consultation on how to make the taxation of trusts simpler, fairer and more transparent announced in the Autumn Budget but hopefully there will be some overlap and joined up thinking. Previous attempts at simplifying IHT in trusts have not lead to changes as the proposals were in fact more complex than the existing regime.