The Office of Tax Simplification (OTS) has published a number of recommendations for how inheritance tax (IHT) could be amended and simplified.
15 July 2019
While these amendments do not go so far as to shake the foundations of the tax itself, nevertheless the proposals would require all practitioners to come to terms with the amendment of a number of rules that have stood firm for decades.
Some of the key proposals include:
1. Reducing the current IHT period during which lifetime gifts are brought into account on death from 7 years down to 5 years and, at the same time, abolishing tapering relief on chargeable lifetime gifts.
2. Replacing/reforming some existing lifetime IHT exemptions (such as the annual exemption, the exemption for gifts in consideration of marriage, and the exemption on normal expenditure out of income), with an overall personal gifts allowance.
3. Removing the CGT uplift on assets that pass free from IHT due to an exemption. In effect that would mean that the recipient would receive the asset at the deceased’s base cost, akin to hold over relief.
4. Making it so that death benefit payments from life insurance policies pass free from IHT without the need for the policies to be written into trust.
It will remain to be seen whether any of these proposals are considered any further by the Law Commission or the Government. The Labour Party has already published a policy document suggesting further, more radical amendments to the UK tax code in general and so one suspects that the above proposals will only survive so long as the Conservative Party remains in power.