Solicitors at Latimer Hinks in Darlington have applauded the recent suggestion that inheritance tax rules should be reviewed but have questioned whether enough is being done to simplify the rules.
The Office of Tax Simplification (OTS), an independent office of the Treasury which gives advice to the Government about simplifying the UK tax system, has made 11 suggestions to reform the current rules in place.
The proposals include amalgamating the existing five potential lifetime gift categories into one, looking again at the existing business property relief and agricultural property relief rules, and ensuring that payments from life insurance are automatically inheritance tax-free without the need to write such policies into a trust.
The OTS did not suggest changing the nil rate band, which has been at its current rate of £325,000 since 6 April 2009, nor was there any suggestion of changes being made in relation to the relatively new residence nil rate band.
Elizabeth Armstrong, a director and solicitor in the Private Client Department and Head of the Tax and Trust Department at Latimer Hinks, said: “It is good to hear that the OTS has made these proposals to simplify inheritance tax rules, however they could certainly go further to make it easier to deal with what is, frankly, an incredibly complex set of regulations.
“Whether or not it can be done remains to be seen. The last foray into such changes led to the residence nil rate band, which is very complicated, even for those working within the legal and finance professions, to understand. The idea itself was relatively simple, but it’s the practical application of it that can complicate things.
“Reform is certainly due. The inheritance tax rules as we know them, were introduced some 35 years ago, and have been constantly updated or amended by other Acts of Parliament since. Drawing all of those rules together into one, consolidated Act would begin to simplify things immediately.
“Should the OTS changes come in and be as simple to enact as they appear on paper, this will be a huge step forward for those who have to deal with inheritance tax. However, they must also look at the other areas they have not yet addressed and make the tax system more comprehensive and user friendly for all.”