IHT General Simplification – a review

 In Comment, Tax

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Inheritance tax IHT

Editor’s note:

The deadline for submissions to the Office for Tax Simplification is Friday 8 June 2018 at 11.45pm and Peter Nellist, along with many others, has submitted his feedback on the proposals for a revision to IHT and we thought you would like to see one experienced practitioner’s feedback. 

If you’d like to send through your comments, don’t hesitate, you have just over 24 hours to meet the deadline – your submission can be made by visiting Inheritance Tax Review Call for evidence and Survey  or by email to ots@ots.gsi.gov.uk.

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IHT General Simplification Review

  1. I qualified as a solicitor in 1973. I stopped practising in 2010. I specialised in private client work and over the period communicated many times with HMRC regarding estate duty, capital transfer tax and IHT.
  2. Stating that “fewer than 5% of estates are liable to IHT” probably underplays the position because –
  • HMRC’s figures are historic
  • Many IHT paying estates will arise on the death of a surviving spouse/partner. On the first death the IHT surviving spouse exemption is likely to have applied to an estate that would otherwise have been subject to IHT.
  • Many IHT paying estates will pass to family (children/grandchildren) who effectively pay the tax.
  • Nearly all assets are increasing in value and the nil rate band remains static

So it would not be unreasonable to suggest that the 5% figure could double to take account of predeceasing spouses. Whilst the duty to pay IHT in the main will fall onto personal representatives most beneficiaries would regard themselves as the payers so their involvement   also should be noted.

  1. The IHT manual contains many deletions, citing in support exemptions in the Freedom of Information Act 2000. One of those deletions is at paragraph 33033 dealing with the application of the loss on sale relief of land sold at a loss within 4 years of death.
  2. This deletion is headed “Is the difference between the date of death value and the sale value more than 25% of the death value.” I can find no more published information about this particular circumstance within HMRC’s manual.
  3. I came across this practice with the last estate where I was an executor. I felt that the approach by HMRC was legally wrong and so unfair that in 2014 I wrote an article on the practice – “A fair share of Inheritance Tax? “: this article can be found on the Lawskills website.
  4. Most taxpayers will accept that they must pay their fair share of IHT but they are likely to resent the application of an unpublished practice that results in paying more tax on the deemed proceeds of a sale that will not be received.
  5. Are departmental and/or individual IHT collection targets given to staff?
  6. It also raises the question as to whether it is right for tax collection practices not to be published? A lack of publication is bound to increase complexity.
  7. Finally who makes the decision to withhold information from HMRC’s manual and who (if anyone) reviews that decision. Where is the public accountability for such decisions?
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