The current IHT regime has been with us, in more or less its current form, for over 30 years. However, it seems there is an increased interest being shown by politicians as to whether the existing rules remain appropriate.
In January 2018 the then Chancellor, Philip Hammond, asked the Office of Tax Simplification to conduct a review IHT. The OTS issued two reports of which the second, published in July 2019, carried the more substantial recommendations. There were 11 in all, and among those were two that would have a very substantial impact on the tax position of many clients:
- Reducing the availability of Business Property Relief.
- Removing the Capital Gains Tax Uplift on Death.
More radically, a report published in January 2020 by the All-Party Parliamentary Group is recommending a complete overhaul of the IHT system such that:
- The rate of IHT is reduced (to 10-20%)
- There is no CGT uplift on death
- Pension Scheme Funds fall within IHT
- All IHT reliefs are scrapped other than:
- Spousal transfer
- Gifts to Charities
- £30,000 a year during lifetime is exempt – anything above that is immediately taxable
- £325,000 is available only on death.
While these are only outline thoughts, what is interesting is the “direction of travel” as regards current thinking in relation to IHT of “those who have the ear of Government”.
With any changes there would be winners and losers, but what is very clear is that, if the above were to be enacted, amongst the biggest losers would be those who currently rely on Business or Agricultural Property Relief. Not only would assets that are currently fully relieved carry a tax liability, but if those assets were sold to pay the IHT they would also carry a CGT liability.
As things stand the Reports and Recommendations are just that – and both were started prior to the tenures of the current Prime Minister and Chancellor. While it seems unlikely that there will be immediate substantial changes, I would suggest that those who may be looking to rely on BPR or APR, or who might make substantial lifetime gifts, might consider whether it is worth advancing plans to pass assets on.