Inheritance Tax is both “unpopular and complicated”, says OTS

The Office of Tax Simplification (OTS) has published its first review of the Inheritance Tax (IHT) system after it was requested by the Chancellor earlier this year.
In a letter addressed to the office in January, Chancellor Philip Hammond said the IHT regime is “particular complex” and would be interested in hearing proposals the OTS may have for simplification.
According to the first review, more than 3,500 people shared their views about IHT, cited as “far more than in any previous review”, indicating that IHT is both a significant and problematic issue for many families.
Among those who responded, many said they felt that, at what is such a difficult time, they were being asked to fill in “complicated forms” even where the relative who had died had only left a small amount.
In fact, Inheritance Tax is payable on less than five per cent of the estates of the 570,000 people who die in the UK each year, but half of the families are still required to fill in the forms.
A number also complained that their relative had worried about IHT during their lifetime, “even though it was not going to affect them”.
In light of the feedback, the OTS said the first of its two-part review of IHT sets out to explain the issues and complexities surrounding the regime, along with an overview of concerns raised by the public and professional advisors, and make recommendations to simplifying the system.
Correspondingly, the first of its recommendations are summarised below:
• reducing or removing the requirement to submit forms for smaller or simpler estates, especially where there is no tax to pay
• simplifying the administration and guidance
• the advantages of banks and other financial institutions having standardised requirements
• automating the whole system by bringing it online
Commenting on the review, Angela Knight, OTS Chairman, said: “Inheritance tax is both unpopular and complicated. The basic design of the tax itself is for Government, but at the OTS we can address that most frequent of all comments “at least make it easier for the families to fill in the forms”. The OTS has worked on ways to address these practical complexities, which have come through loud and clear.
“The recommendations in this report will make it easier for the majority and would mean that in future, many may not have to do the forms at all. Improving the administration of this tax in these ways is important as having to deal with the current process can seem overwhelming to people at a time when they are both preoccupied and distressed.”
To read the first review in full, please click here.

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