Saffery Champness Partner David Chismon has responded to recommendations by the All-Party Parliamentary Group
Earlier this year, the All-Party Parliamentary Group (APPG) for Inheritance and Intergenerational Fairness published their recommendations for wide-ranging reforms to the current Inheritance Tax (IHT) regime. This is not the first time that IHT has come under the spotlight and follows recommendations set out by the Office for Tax Simplification (OTS) in two earlier reports, which the APPG report describes as “tinkering at the edges”. The APPG paper proposes comparatively radical reforms to a system that it describes as having been criticised as complex, ineffective, riddled with anomalies, distortionary and unfair, unpopular and ripe for reform.
David Chismon, a tax partner in Saffery Champness Bournemouth’s office notes: –
“Following the APPG announcements Baroness Penn when answering questions in House of Lords in May said that she was not aware of active consideration of the changes to IHT recommended in the APPG paper. Given the level of financial support the Government has announced as a result of Covid-19 it is clear that the costs of these measures will need to recouped by the Treasury in due course. It may be that the Inheritance tax regime is one area of the tax rules which can be used to generate further revenue for the Treasury.”
The AAPG made various recommendations and these would result in major changes to our current understanding of the IHT rules. One of the suggested changes was abolishing all IHT reliefs and exemptions, other than charity and spouse exemptions, but including Agricultural Property Relief and Business Property Relief. This could have a dramatic impact for farmers and business owners. A further suggested change was the removal of the capital gains tax free uplift on death. For the less wealthy individual but those who still suffer IHT, the suggestion of a reduction in the IHT rate from 40% to 20% would be welcome. Although the fact that lifetime gifts might be taxed at the date of gift rather than if there was a death within 7 years of that gift, might change when gifts are made.
David continued, “These suggested changes and the others if implemented would radically change the behaviour of taxpayers and how they pass wealth down to the next generation. If taxpayers are currently thinking about making gifts during their lifetime it may well be worth them ensuring they make these gifts under the current IHT regime. It is important to consider if a gift might create a capital gains tax charge, although the recent economic downturn might mean that any inherent gains are reduced. There are also methods of passing assets on without crystallising either CGT or IHT depending on the taxpayers circumstances.”