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Office of Tax Simplification Inheritance Tax Review – First Report

Office of Tax Simplification Inheritance Tax Review – First Report

Last year, the Office of Tax Simplification (OTS) was asked by the Chancellor of the Exchequer to conduct a review into Inheritance Tax (IHT). Their call for evidence received a record amount of responses from both professionals and members of the public.

The OTS’s findings are being published in two reports. The first report, covering administrative concerns, was published at the end of November 2018, and the second scheduled for publication in Spring 2019 which will cover other wider technical areas of concern.

The first report made a number of recommendations. The key recommendations are listed below and the full report can be found here.

Digital System

The OTS’s key recommendation is that a fully digital system be implemented for dealing with IHT forms preferably alongside a means of applying for probate digitally. An online portal similar to the Self Assessment Income Tax system is envisaged by the OTS in which the Executors would complete a list of questions which would create a tailored return.

Simplifying the IHT Forms

The OTS acknowledge that a fully digital system will be expensive and will take time to introduce. Pending the implementation of a digital system, they recommend that HMRC should make changes to the current forms to reduce and simplify the administration of estates. This includes introducing a very short form for the simplest estates (shorter than the current short form), allowing the current forms to be more easily filled in on a computer.

Review of HMRC’s guidance

Problems were identified with HMRC’s current IHT guidance and a review was recommended to:

  • Target and reduce concern for those who worry unnecessarily.
  • Be clear, consistent and easy to navigate (the OTS noted that the guidance can often contradict itself).
  • Be linked to, or located with, other related guidance including probate.
  • Be expanded with worded examples, a road map, timescales and a tax calculator.
  • Be sufficient for complex estates to apply the law and practice correctly.

Payment deadlines and probate

The OTS note a number of problem areas in regards to payment deadlines.

  • The fact that there are differing deadlines for the payment of IHT and the submission of the IHT forms appeared confusing and it would be simpler if the deadlines were the same.
  • The six month deadline is often not long enough to calculate how much IHT should be paid as it is not always a top priority immediately after a death and that gathering information can be time consuming and difficult.
  • The need to pay IHT before probate can be obtained can create a funding gap for executors

The OTS propose that executors could be allowed to obtain probate without submitting IHT forms or on the submission of a simple form (where estates are low or no IHT is due) and to consider whether executors could be given a formal certificate confirming their status for situations where it is not possible for executors to obtain information without a formal document. HMRC would need to liaise with HM Courts and Tribunals Service regarding these.

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