Budget docs reveals IHT in HMRC crosshairs
22 November 2017
HM Revenue and Customs unveiled its own commissioned research report looking at how the inheritance tax system is functioning. It provides a further hint the IHT system is in the crosshairs for future reform, says Rachael Griffin, tax and financial planning expert at Old Mutual Wealth
The IHT system is not straightforward and has a number of legacy clauses and exemptions that government may seek to reform.
HMRC’s research focussed on business property relief and agricultural property relief, likely seeking to see if the allowances were being misused. However, the report notes the majority of people are using the exemptions as they are supposed to be used, to allow them to keep the business or farm in the family, without having to break it up or sell some or all of the assets to pay an inheritance tax bill. Indeed, many business-owners feel that their businesses would likely be sold to cover IHT bills if the relief were not available.
Alongside today’s report, the Office for Tax Simplification last month published its plan for the year ahead and pointed to IHT as an area ripe for reform. One of the best examples of over-complication in death taxes is the residence nil rate band, which is incredibly complicated and causes a lot of confusion. An easier method to achieving the same goal would be to simply raise the standard nil rate band amount to £1m.
For individuals and families that are thinking about estate planning, it is important for them to keep an eye on whether IHT rules do change and make sure they take advice from a professional financial planner to ensure they are making the right arrangements in order to pass on assets to their family tax efficiently. The HMRC report published today shows very few people properly understand the reliefs and exemption available, so it is crucial to take professional advice.
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