What is the current position with Inheritance Tax?
5th February 2018 by Danny Clifford
In May 2017 a report was commissioned by HMRC and completed by IFF Research entitled “The Influence of Tax Reliefs and Exemptions on Estate Planning and Inheritances”. A copy of this report is available here.
On 19th January 2018 the Chancellor wrote to the Office of Tax Simplification (OTS) asking them to look at the IHT regime. Part of this request is to be welcomed: “proposals for simplification, to ensure that the system is fit for purpose and …as smooth as possible” however, he has rather craftily extended the scope.
His request also asks that the review “could also look at how current gifts rules interact with the wider IHT system, and whether the current framework causes any distortions to taxpayers’ decisions surrounding transfers, investments and other relevant transactions”.
It is difficult to see how this comes under the heading of “simplification”.
It is now crystal clear (if it wasn’t already) that the existing IHT regime is being looked at closely by those in power, and experience tells us that when this sort of attention is given to an area with this type of narrative the true target is to increase the tax take. It is impossible for the OTS to carry out the review above without looking very closely at the various reliefs available – and also impossible to state that those reliefs (as with all such reliefs) do not distort behaviour. The Chancellor already knows the answer to the question.
One cannot say for certain that there will be significant changes to the IHT system, but certainly all of the building blocks are being put into place such that it has to be a distinct possibility.
So what should you do?
There is a fine line here. I have always been against people taking action that they would not otherwise ever have taken based on the perception that legislation might change. There is a cost and a consequence to such actions. However, if IHT planning is already in your thoughts then there may be merit in advancing certain planning to ensure that advantage is taken on reliefs that may not be available in 2 years’ time.
If you would like any advice on IHT planning, including the use of Trusts, please contact Danny Clifford who will be happy to help.
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