The Financial Secretary to the Treasury has written on behalf of the Chancellor to the Office of Tax Simplification (OTS) in response to the first report on Inheritance Tax. The response details two new measures announced.

The OTS published the first report on Inheritance Tax in November 2018. The Chancellor's response sets out the Government's intentions and proposed measures arising from the report's recommendations.

The response states that the Government strongly supports the key recommendations of the report and has detailed the following specific measures:

OTS recommendation  Government response
Implement a fully integrated digital system for IHT. The Government will consider this as part of its commitment to build a fully integrated digital service for tax as a whole.
Pending digitalisation, the administration related to estates should be reduced and simplified. A very short form should be introduced for the simplest estates.

Accepted. The Government will review ways of achieving this but has announced:

  • The removal of the need to report probate to HMRC for over 90% of estates that do not have an IHT liability.
HMRC guidance review to ensure clarity, sufficiency for complex estates, appropriate links where required, worked examples etc. Accepted. HMRC are working with the Government Digital Service to achieve this. From Spring 2021, a new online tool is being trialled to help taxpayers to establish if there is a tax liability and, if so, what the next steps are.
Introduce automated payment receipts and refine the current 12 week response period if required.  Accepted. Since the report, all payments are now electronic and so are recorded. HMRC is reviewing whether receipts can be issued. HMRC report that the 12 week response period is 'working well'.
HMRC to liaise with HM Courts and Tribunal Services (HMCTS) to streamline the payments and probate process. Accepted, The Government accepts that this is key to improving the system. Since the report, HMRC now provide confirmation of IHT payment directly to HMCTS streamlining that element of the process.

 Lifetime charges & trust recommendations:

  • Review the requirement for trustees to submit forms when no tax is due and no exemptions/reliefs are claimed.
  • Pending digitalisation:
    • Have separate forms for each reportable occasion.
    • Improve guidance for the process.
    • Amend signature requirements.
    • introduce automated receipts for IHT100 forms and IHT payments and a new enquiry period.

Accepted. The Government has announced:

  • The need for physical signatures on IHT returns will no longer be required.

There will also be changes to the review period, announced later in the year, and HMRC continue to look at automating systems and reducing the reporting requirements on trustees where no tax is due.

 

The Government will issue its response to the OTS' second report in due course.

Useful guides on this topic

IHT: Estate planning checklist
This checklist covers some of the essential planning points that taxpayers should know when planning for their estate and inheritance tax.

UK Trusts
Trusts have been used in various forms for tax planning purposes for many years and the tax legislation has had to evolve with them.

External link

Chancellor responds to the first OTS report on Inheritance Tax


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