In its current form, IHT was introduced in 1986. Since then, it has been subject to a continuous process of evolution and change, coupled with developments in the economic and social landscape.
Chancellor Philip Hammond and the financial secretary to HM Treasury requested that the OTS carry out a review of a range of aspects of IHT and how it currently functions to identify simplification opportunities.
The chancellor will be responsible for any final decisions on tax policy, meaning that the recommendations in the OTS report may not necessarily be adopted.
If recommendations in the review are accepted, they could be included in the Autumn Budget 2018 and the subsequent Finance Bill 2019.
Only 5%
Fewer than 5% of estates are liable to IHT, but there has been an increase in the number of people that think they may be within the scope of the tax.
Jackie Hall, tax partner at RSM, said: “This figure will rise in line with the large increases in property prices, particularly in the south of the country.
“As more and more individuals start to be concerned about IHT liabilities, it is imperative that those individuals are able to understand the basis of the tax; and what their responsibilities and reporting requirements are.”
Internationally competitive
Hall continued: “The drive for simplification must also take account of capital and wealth tax regimes in other countries. The resulting IHT regime in the UK must be competitive in comparison with other regimes especially as the recently introduced deemed-domicile rules start to bite for non-UK domiciled individuals living in the UK.
“From 6 April 2017, non-UK domiciled individuals resident in the UK for a sufficiently long period of time, will be treated as deemed UK domiciled. As a result, all of their assets, income and gains outside the UK will fall within the scope of UK tax.
“Such individuals might be particularly interested in taking further advice regarding this change to their circumstances even before the results of the simplification are known,” she said.
Calls for evidence
The overall aim of the OTS review will be to identify opportunities and develop recommendations for simplifying IHT from both a tax technical and an administrative standpoint.
The OTS will publish a report in the autumn of 2018 that:
- Provides an initial evaluation of aspects of the current IHT regime, and what they mean for taxpayers, HM Revenue & Customs and the Exchequer;
- Identifies opportunities for simplification of IHT supported by analysis and evidence; and,
- Offers specific simplification recommendations for government to consider.
The statement was dated 15 February and confirmed that the OTS will issue a call for evidence early in 2018. No exact date was given.
In International Adviser’s latest monthly Digital Edition, Mark Battersby spoke to three IFAs about what they would like to see come out of the IHT simplification review.
