‘Whatever it is, inheritance tax is not a tax on the amounts which people inherit. Instead, it is a tax on some lifetime transfers, and most bequests on death. It is high time that the purpose of IHT was reviewed. RSM therefore welcomes the proposed review of the inheritance tax regime.
‘However we are concerned that the lack of legislative time will mean that – irrespective of the depth and breadth of the OTS recommendations – the reality is that any subsequent changes of law or practice will amount to little more than tinkering.
‘We believe that, along with a consideration of purpose of the tax, the scope of IHT and the number of people who potentially have to pay the tax should also be reviewed. When introduced in 1975 capital transfer tax was intended to tax only the wealthiest individuals. This policy approach continued when capital transfer tax became inheritance tax in 1986. In the course of the following 32 years, inheritance tax has become a major worry for ordinary people up and down the length of the UK.
‘As the scope of inheritance tax has increased, so has its complexity. Exemptions and reliefs, such as the additional residence nil rate band, have added to that complexity.
‘At the same time, some exemptions such as the annual exemption, the marriage exemption and the small gifts exemption have not kept pace with inflation. We would like to see these restored to realistic levels so that most people don't have to worry about them.
‘On 22 November 2017 HMRC published a report Behavioural evidence around Inheritance Tax and reliefs. The conclusions of this report may signal an expectation in government that the entitlement to business property relief in particular may be curtailed in the course of the current review.
‘It is also important to review IHT in the context of the competing and wide-ranging regimes elsewhere in the world. The US is one of the more extreme examples where potentially up to $22m can be passed to the next generation tax free.’