The Office of Tax Simplification wants to know what you think about inheritance tax and so does LEBC. We know that many of you are keen to pass assets on to children and grandchildren but find the current raft of allowances and rules surrounding this tax confusing.
One issue for executors is that HMRC require the inheritance tax due to be paid before probate can be granted, yet until an executor has probate, they cannot sell any assets of the estate to pay the tax. Bank loans, which used to be a common way of bridging this, are less readily available but HMRC will be flexible where it can be shown that efforts have been made to raise finance. Similarly, local authorities will usually waive council tax while a property is empty and waiting to be sold but only if it is unfurnished, yet executors cannot remove the contents until they have probate.
Due to the complexity of this tax every estate costs more to administer and it is time consuming for executors to complete the lengthy forms required by HMRC, and costly to obtain valuations of personal effects and property, even for simple estates where no tax is due. Only 5% of estates pay the tax*. Yet it’s complexities delay probate and extends the period before the estate can be distributed, sometimes causing financial hardship to dependant beneficiaries.
While there are exemptions for gifts between spouses and civil partners, there are no exemptions for other types of household. It is increasingly common for grown up children to live in the parental home long after age 18. Many older individuals move in with family or siblings share a property in their later life. This enables them to share costs and provide companionship and support. Such arrangements can avoid the need to seek social care and so save the taxpayer substantial sums, but these living arrangements are not recognised by the rules governing inheritance tax. The 3.3 million couples who are cohabiting** also have no exemption when assets pass between them. All in all, the current rules do not appear to fairly reflect modern society.
It is partly in recognition of this that the OTS has launched a consultation which seeks views from the public and professional advisers. The consultation questionnaire is available on the OTS website till 8 June and a short questionnaire will take 10 minutes to complete. You can find it at www.gov.uk/ots.
If you wish to expand on your views you may wish to respond to the call for evidence and can do so by emailing firstname.lastname@example.org. LEBC will be responding to the consultation so do let us have your views too. Please tell us how you would wish inheritance tax to be reformed and if you have had experience as an executor or beneficiary we want to hear from you by emailing us at email@example.com.
It is expected that any changes in the rules, which the Government decides to adopt, will be included in the November Budget.
In the meantime, should you wish to take advantage of current rules and allowances and plan for any inheritance tax likely to fall due please do contact us to arrange a review.
Director of Public Policy, LEBC
*Office of Tax Simplification Inheritance Tax Review Call for Evidence
**ONS Households Survey 2017
LEBC Group Ltd is not responsible for accuracy and may not share the author’s views. The Financial Conduct Authority does not regulate tax planning. Please note reviews may be chargeable.