Look forward to a new decade by looking back
Malky Chaloner | 08.01.2020
06.02.2020 Alex Wavell
At the end of last month the All-Party Parliamentary Group for Inheritance & Intergenerational fairness (APPGIIF) published a report which recommended a complete overhaul to the inheritance tax (IHT) system. It should be noted that the APPGIIF is an informal group, and whilst is contains members from both the House of Commons and House of Lords, neither House has given it formal approval.
The report is very striking, and if implemented would see a very different way of taxing wealth which is passed between persons. Their reasoning behind the recommended changes is that the current system is unfair and complex. There is no denying that IHT in its present form is a tax which greatly divides opinion, arguably more so than any other tax, amongst both the public and politicians.
To summarise some of the recommendations:
Naturally, some of these recommendations would have separate knock-on consequences. For example, by abolishing the concept of PETs and the nil-rate band, and introducing the lifetime 10% rate, it would no longer be the case that the gift with reservation of benefit (GWROB) rules would be required – rules which are often very complex and poorly understood. Similarly, the seven-year clock would cease to exist, and trusts could no longer be used in order to benefit from ‘additional’ nil-rate bands.
The APPGIIF do not bind themselves to the exact figures as stated above (eg 20% at £2million). They accept that there is room for debate and movement. Their focus is more on ensuring that a system is put in place which is better understood, and is considered to be fairer than at present.
As with the recent report by the Office of Tax Simplification (which the APPGIIF refer to in this report, generally in a favourable manner), in relation to forming (not replacing) IHT, the Government are not obliged to act on anything in this report. Therefore, at present it is simply a case of having to wait and see. Given though the wind of change which is being felt in relation to IHT, it would not be a surprise if IHT changes were to be introduced at some stage – but whether on a small scale or a large scale, we do not know.