By A review of the process of paying Inheritance Tax (IHT) is to be undertaken in a two-part procedure according to the Office of Tax and Simplification (OTS). This is in response to a request from the Chancellor of the Exchequer, in an open letter which was sent to the OTS in January 2018.
The first part of the Chancellor’s letter stated that the current process surrounding payment of IHT is too complex and out-dated. The OTS responded by undertaking a two-part review into the IHT process and published their first report on 23rd November 2018, looking at the administrative system behind the tax. The second report covering the wider implications of IHT will be published in the spring of 2019.
Over 3,500 people have responded to the OTS review and have shared their views on the current IHT system of payment. Many respondents told the OTS that they were required to complete lengthy, confusing forms in the aftermath of losing a loved one, even when their relative had only left them a small estate.
Currently, only 5 per cent of the 570,000 people who die each year in the UK are required to pay Inheritance Tax but on average, yet half of the families left behind are required to complete the IHT forms.
Of the 3,500 people who responded to the OTS, many also shared concerns that their relatives had worried about the IHT procedure before they had passed away, even in cases where they wouldn’t be affected.
The problems and complexities surrounding the administration of IHT have been voiced by concerned members of the public and professional tax advisors, according to the report carried out by OTS. The report has also outlined recommendations for simplifying the process in future.
The first report has highlighted that it would be beneficial to reduce or completely remove the requirement for members of the public to submit IHT forms for small and simple estates, especially where there is no liability for Inheritance Tax to be paid.
The report also emphasised the potential benefits of simplifying the administrative process of IHT payments, as well as the advantages that banks and financial institutions would gain from a more standardised and automated IHT system that was accessible online.
Following the results of the recent report, Angela Knight CBE, chairman of OTS, commented: “Inheritance tax is both unpopular and complicated. The basic design of the tax itself is for government, but at the OTS we can at least make it easier for the families to fill in the forms.”
Dealing with difficult and confusing paperwork is considered overwhelming for people who are otherwise distressed and preoccupied with other concerns during a bereavement following the death of a relative. The recent OTS report outlined recommendations to make the IHT process easier for people to follow.
Paul Morton, tax director at OTS commented: “It has been hugely positive to have had the benefit of so many professional insights into the experience of dealing with Inheritance Tax alongside deep engagement with many professional advisers.
“This has been key to informing the overview of the tax that the report provides, and will underpin the OTS’s continuing work on its second report.”
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