OTS publishes the second part of its review of IHT
For intermediaries onlyMon Jul 15 13:26:00 BST 2019 Back to results
The Office for Tax Simplification (OTS) published the second part of its review of Inheritance Tax (IHT)(Opens new window)(Opens new window)(Opens new window) on 5 July 2019.
Rather than recommending a wholesale re-write of the IHT legislation, it's proposed changes which would simplify specific areas of complexity. The Government would need to pass legislation to introduce any of these recommended changes, so we might see some announcements in the Budget later this year or next year.
Here's a summary of some of the recommendations from the paper.
- Replacing the yearly £3,000 exemption and gifts in consideration of marriage or civil partnership exemption with a gifts allowance.
- Reforming the normal expenditure out of income exemption or replacing this with a higher gifts allowance.
- Reviewing the level of the current £250 small gifts exemption.
Gifting period and taper relief
- Lowering the seven year potentially exempt transfer period to five for gifts to individuals.
- Removing taper relief.
14 year rule
- Recommending that gifts outside the seven year gifting period be ignored.
Liability to pay IHT
- Reviewing the rules on who pays IHT on lifetime gifts and how the nil rate band is allocated on death.
Interaction with capital gains tax (CGT)
- Recommending that where a relief or exemption applies for IHT purposes, the recipient should be treated as receiving that asset at historic book cost for CGT purposes rather than at probate/market value.
- Recommending that death benefits from term policies (and not whole of life) should be exempt from IHT, where the policy isn’t held in trust.
Pre-owned assets tax
- Reviewing the pre-owned assets tax rules to see if they are still required.