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Will Office of Tax Simplification survey result in tax shake-up?

22 May 2018

As the OTS looks to simplify the tax regime, could its latest survey result in the expected shake-up of IHT rules? Liz Hardie, technical specialist, Prudential, looks at the content of the survey

After publication of the IHT Review Scoping paper in February 2018, the Office of Tax Simplification (OTS) published an online survey on 27 April 2018 along with a ‘Call for evidence’ document.  Both invited individual members of the public, as well as professional advisers and representative groups, to answer questions and give information about the existing legislative framework and HMRC’s administrative processes.

This is the first time that the OTS has issued a survey to the public and it welcomes views from everyone with an interest, including those who have gone through the process of establishing an IHT liability when a relative has died or as executor of a will.

Consultation

The consultation closes on 8 June 2018 and the OTS is expected to publish its report in the autumn of 2018.

Both the survey and the ‘Call for evidence’ document ask questions about IHT Forms, Administration and Guidance; Lifetime Gifts and Businesses. The Call for evidence also asks about Charitable Giving, the wider IHT System and other areas of complexity, specifically mentioning interaction of trusts, pensions and life policies with IHT and the residence nil rate band.

The survey contains a ‘pop quiz’ to test knowledge and perception of IHT.  It then raises questions about usage of the IHT exemptions.

The bulk of the survey concentrates on the individual’s experience during administration of an estate, focusing on the amount of information to be gathered, which was the most time consuming and if the estate actually had IHT to pay.

The ‘Call for evidence’ document mirrors this and also asks for views on the current system, particularly where there are discrepancies in deadlines, 6 months to pay the tax but 12 months to submit the IHT form, and the practicalities of having to pay IHT prior to probate being granted.

A large portion of both documents relate to businesses, specifically Business Property Relief (BPR), Agricultural Property Relief (APR) and ownership of AIM shares.

The questions probe into BPR interaction with Capital Gains Tax (CGT), Entrepreneurs’ Relief and APR. As well as this, inconsistencies in requirements, definitions and approaches for the different taxes and reliefs have been highlighted, particularly the differing rules to determine if a business is trading or non-trading.

These questions are in keeping with the objectives of the ‘Scope of Review’ document which states that the OTS will consider:

  • the process around submitting IHT returns and payment of tax, including cases where is it obvious that there will be no tax to pay.
  • gifting and using IHT exemptions
  • common administrative and practical issues about estate planning and the process of obtaining probate
  • how the rules and reliefs affect decision making and timing of transactions as well as interaction with other taxes
  • the perceived complexity of the IHT rules

What outcome?
While it remains to be seen what the outcome of the consultation will be, given the objectives and types of questions in the consultation, there could well be a shake-up in the treatment of businesses and business property.  And perhaps the process of dealing with the administration of an estate will become easier.

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