Inheritance Tax: Is It Time For A Change?
The OTS has given its second report to Parliament, recommending simplification of Inheritance Tax ...
It is a thorough review of the administration and technical aspects of Inheritance Tax, but do remember, this is not draft legislation just yet. Because of the political turmoil in and around the House of Commons, I'm still not sure which of these recommendations will be implemented.
And I'm not even sure when they'll be considered and by what colour of Government, but hopefully, once Brexit is out of the way, things will settle down with a majority Government and we can all get back to normal.
Some things the Chancellor requested the OTS to look at were considered too difficult to tackle right now and were either bounced back to ministers or handed off to HMRC to deal with separately.
So the main recommendations are as follows:
- Lifetime gift exemptions should be combined into a single personal gift allowance.
- Reformation or complete replacement of the 'normal expenditure out of income' exemption.
- Reducting in the period of potentially exempt transfers to five years from the existing seven.
- Get rid of taper relief for gifts made more than three years before death and the 14-year rule that applies to gifts made into trusts.
- Reform the rules around nil-rate band allocation for lifetime gifts.
- Remove Capital Gains Tax uplift on death.
- Align CGT trading activity and Business Property Relief.
- Review farmhouses and Agricultural Property Relief.
- Make death benefit payments paid from term life policies free of IHT without them needing to be written in trust.
- Review the relevance of the pre-owned assets rules.
There really is a lot going on here, yet I wonder how many of them would make it into legislation.
Post General Election 2019, If the Government decides to move forward with these recommend changes to Inheritance Tax, the OTS have suggested they are introduced after a certain date with no further complexity in the transitional period.
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