Chancellor Philip Hammond has commissioned the Office of Tax Simplification (OTS) to review the UK’s inheritance tax (IHT) regime, and outline ways in which the tax can be simplified.
In a letter to Angela Knight, Chair of the OTS, and its Tax Director, Paul Morton, the Chancellor acknowledged that the existing IHT regime is ‘particularly complex’.
He stated: ‘I would be most interested to hear any proposals you may have for simplification, to ensure that the system is fit for purpose and makes the experience of those who interact with it as smooth as possible.’
Mr Hammond suggested that the OTS’s review should focus on technical and administrative issues surrounding the tax, alongside practical issues related to estate planning and disclosure.
The review should also examine how existing gifts rules interact with the IHT system, and look at whether the current rules cause taxpayers to rethink their decisions in regard to transfers and investments, said the Chancellor in his letter.
IHT is currently charged at 40% on the proportion of an individual’s estate exceeding the ‘nil-rate band’ of £325,000. The residence nil-rate band (RNRB) also applies in addition to the nil-rate band, meaning that a family home can be passed wholly or partially tax-free on death to direct descendants, such as a child, grandchild, step-child, adopted child or fostered child.
A scoping document for the review into IHT will be published ‘in due course’, the OTS said.