05 February 2018
Philip Hammond has written to the Office of Tax Simplification (OTS) asking for a review, describing the present Inheritance Tax (IHT) regime as ‘particularly complex’. It is unknown as to whether his plans for IHT reform will be an overhaul, upheaval, simplification, update or just a simple review.
The Times reported that ‘the letter raises the possibility that generous reliefs that can be used to mitigate IHT bills may be limited or removed entirely.’ In his letter, Mr Hammond goes on to request that he would be interested to hear any proposals for simplification, and adds that the OTS ‘could also look at how current gift rules interact with the wider IHT system’. He also suggests to look at ‘whether the current framework causes any distortions to taxpayers’ decisions surrounding transfers, investments and other relevant transactions.’
Whatever his reason for requesting this review, an important factor to consider is that both the business and farming sectors rely on the reliefs on business and agricultural property when transferring their assets through generations. The reliefs have ensured that family businesses are able to continue, rather than being sold to pay any IHT that would otherwise be due.
At this stage it is not entirely clear which reliefs Mr Hammond is targeting and it would appear that the OTS has not been given a mandate to try to raise revenue. Therefore, it is hopeful that any new rules to limit reliefs may be compensated for in some other way. This may or may not work in the farmer’s favour. Ultimately, this means that IHT is back on the agenda and once the review starts it’s difficult to know where it will end up. One thing that is pretty clear; it is unlikely that the reliefs we rely on will become more generous than they presently are!
What should you do?
As a minimum you should review your succession plans and consider bringing them up to date. If you are in the middle of any planning that relies on IHT reliefs, it may well be worth a call to your tax adviser to see how they think your plans could be affected by this review. If you have any concerns or would like to discuss your IHT plans in greater detail, please contact one of our specialists at your nearest location.
Alternatively, fill out our contact form here to get in touch.