The Office of Tax Simplification provides recommendations to simplify Inheritance Tax

We recently reported that an Inheritance Tax review was to be published by the end of this year, and the Office of Tax Simplification (OTS) has now released their first Inheritance Tax review report. This first stage of the report provides an overview of the tax and “sets out recommendations on administrative issues”.

The review on Inheritance Tax was carried out after the Chancellor of the Exchequer requested the review at the beginning of 2018. The OTS’s primary aim was to provide recommendations to simplify Inheritance Tax from an administrative and technical standpoint.

As part of the review, the OTS called for people to share their personal experiences and perceptions of Inheritance Tax. More than 3,500 people shared their views, which was a much higher response rate than in previous tax reviews. This highlights the current confusion and concerns surrounding Inheritance Tax, stressing the need for the public consultation. In addition, the OTS gathered evidence from professional advisers, representative bodies and academics, as well as setting up a Consultative Committee for advice.

The evidence gathered highlighted that people have concerns about the administration of tax, areas of complexity within the rules and wider perceptions about the tax generally. More specifically, the survey results revealed that the public found administering an estate to be a timely process, with 38% of respondents (who didn’t use an adviser) stating that they spent more than 50 hours on estate administration. Furthermore, the responses revealed that the processes of understanding and completing the relevant forms, and obtaining probate were most commonly cited as the most time-consuming.

Many people raised concerns about how Inheritance Tax returns must be submitted, even when there is no tax to pay. In the UK, only 5% of estates are subject to Inheritance Tax upon death, which accounts for fewer than 25,000 estates. However, 65% of respondents (who didn’t use an adviser) answered that they “still had to provide significant amounts of information.” Additionally, 275,000 Inheritance Tax forms were completed in the 2015-16 tax year, even though Inheritance Tax was only payable on 24,500 estates. 

The key recommendation from the report states that “The government should implement a fully integrated digital system for Inheritance Tax, ideally including the ability to complete and submit a probate application.” Although, the OTS recognises that this would not be a quick, easy or cheap task to accomplish.

Some other recommendations advise HMRC to:

• Make changes to the current Inheritance Tax forms to reduce and simplify the administration of estates. This includes introducing a short form for the simplest estates.

• Carry out a general overview of its Inheritance Tax guidance.

• Introduce an automated payment receipts system.

• Liaise with HM Courts and Tribunals Service to streamline the probate and payment process.

• Review the requirement for Trustees to submit forms when no Inheritance Tax is due.

At Kings Court Trust, we often see those responsible for administering an estate finding it difficult to understand the legal and tax aspects of estate administration. Therefore, we welcome the recommendations from the OTS to simplify administrative issues associated with Inheritance Tax, and hope to see HMRC implement the suggestions.

Kings Court Trust are experts in estate administration and can take care of absolutely everything within the estate administration process. If you have any questions about estate administration or Inheritance Tax, call our experienced Client Services Team on 0300 303 9000 who can answer all of your questions.