The government has announced plans to cut the red tape around inheritance tax.
A change in reporting requirements is on the cards following recommendations by the Office of Tax Simplification to the Treasury more than 18 months ago.
In a policy paper released as part of today’s ‘Tax Day’, the government says it will “reduce administrative burdens” for those having to deal with inheritance tax.
Reporting regulations will be simplified later in 2021 so that from 1 January 2022, more than 90 per cent of non-taxpaying estates will no longer have to complete IHT forms for deaths when probate or confirmation is required.
The paper says says: “In addition, the current temporary provision for those dealing with a trust or estate to provide an inheritance tax return without requiring physical signatures from all those involved will be made permanent.
“Reporting regulations will also be updated to clarify the requirement for estates to submit an IHT account where the deceased was never domiciled in the UK but owned indirect interests in UK residential property.”
The OTS has published a letter it received from financial secretary to the Treasury, Jesse Norman, in which he states the government will respond to the recommendations made in the OTS’s IHT report on simplifying the design of of reliefs “in due course”.
Published in July 2019, the OTS’s second IHT review noted IHT is unpopular and “raises strong emotions, not least because it affects people only occasionally, in sometimes significant and surprising ways, and at a sensitive time.”
In 2019 it said that there were 590,000 deaths each year, with IHT forms submitted for 46 per cent, some 275,000 people.
Quilter head of trusts and technical Rachael Griffin says: “This is a step forward towards greater simplicity, but leaves the system largely unchanged, and we are still a long-way from seeing any fundamental changes to the IHT system as recommended by the OTS and the all-party parliamentary groups on inheritance and intergenerational fairness.”
Currently, individuals are not required to pay IHT if the value of the estate is below the nil rate band of £325,000. An additional residence nil rate band £175,000 applies to those with an estate. Everything above this is taxable at 40 per cent.
