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Office of Tax Simplification: Inheritance Tax Review - Law Society response

The Law Society welcomes the opportunity to respond to the Office of Tax Simplification’s Inheritance Tax Review: Call for Evidence, published on 27 April 2018.

Inheritance tax advice is a key part of legal practice for solicitors, given its relevance to wills, probate and trust advice. 

The Law Society was pleased to host a roundtable discussion earlier this year with officials from the OTS, prior to the call for view being issued. In our response, we acknowledge the need for simplification of the existing legislative framework and the administrative processes around inheritance tax (IHT) in a number of areas.

In our response, we make a number of recommendations for simplification of the current regime. These recommendations include:  

  • Implementing a streamlined process for the completion of IHT forms by utilising online automation and form building technology available on HMRC’s website.  
  • Introducing a graduated tax rate or a return to the inflationary increase in the amount of the Nil Rate Band (NRB).  
  • Increasing the annual exemption amount for lifetime giving in line with inflation (e.g. £10,000). This may provide the opportunity to remove small or insignificant amounts from the scope of monitoring, which in itself would be a simplification.
  • Repealing the Residence Nil Rate Band (RNRB) and replacing it with an increase in the standard NRB, particularly if this can be kept simple and tax neutral.
  • Removing current inconsistencies across the IHT regime i.e. in respect of Business Property Relief (BPR) not being available on furnished holiday lets.
  • Extending the bereaved minor trust regime to age 25, extending it to any child inheriting under a Will and repealing 18-25 trusts.

Whatever changes are implemented, we urge the OTS to retain a spouse exemption and to consider extending this to unmarried cohabitees.

If there is to be a complete overhaul of the Inheritance Tax Regime, we would welcome a thorough and in-depth review of alternative options with a broad and detailed consultation with relevant stakeholders and interested parties.

The Law Society would like to thank the Society’s Capital Taxes Sub-committee and Wills & Equity Committee who were instrumental in preparing this response.