Review of inheritance tax welcomed | WPN World People News

The Chartered Institute of Taxation (CIOT) has welcomed the Chancellor’s invitation to the Office of Tax Simplification (OTS) to carry out a review of inheritance tax.

John Bunker, Chair of CIOT’s Succession Taxes Sub-Committee, said:

“Modern IHT dates back to the 19th century when the Government introduced estate duty, a tax on the capital value of land. But the rules around it have grown piecemeal and not always in a logical fashion. A thorough review of its calculation and administration is long overdue.

“The review must begin with an understanding that you cannot add simplicity, rather you must remove complexity. It may be beyond the scope of this review, but the creation of an additional residence nil rate band for an estate has undoubtedly added extra complication to the inheritance tax regime. While we recognise this is the deliberate product of a clear government policy objective – indeed a manifesto commitment – we think it worth investigating, in the context of this broader review, whether there are alternative ways of achieving the Government’s objectives without adding so much additional complexity to the system.

“Exemptions to inheritance tax are generally a complex area. We see definite potential for simplification here, possibly by a larger annual exemption in place of all the others such as marriage and small gifts.

“We would also suggest the OTS look at the complex interaction of Agricultural Property Relief and Business Property Relief in its review.

“There is a good case for simplifying how trusts are taxed in relation to inheritance tax. A general review of trust taxation was announced by the Chancellor in the Autumn Budget. How the OTS’s review will interact with this remains to be seen. It is important that both the OTS and the wider review do not lose sight of the fact that most trusts are set up for non-tax reasons such as protecting capital and vulnerable beneficiaries.”

Source:Chartered Institute of Taxation