While the government continues to muddle through Brexit, and the opposition is busy publishing “Land for the Many” suggesting much wider and more radical reforms, in the background the Civil Service continues to quietly review Inheritance Tax.
The Office of Tax Simplification recently released its second review of Inheritance Tax.
This looks more closely at the rules, quirks and overall design of the tax itself, setting out key areas for further consideration, to cut back on red tape.
A major change recommends reducing the 7 year gifting period to 5 years.
Good news as it makes it quicker and easier to tax plan, but, the sting in the tail is to abolish taper relief making it an all or nothing relief with anything less than 5 years subject to tax at the current 40% rate.
In relation to Agricultural Property Relief (APR) and Business Property Relief (BPR) recommendations include:
- Lowering the level of trading activity for BPR to be similar to Capital Gains Tax (CGT) gift holdover or entrepreneur’s relief. The current level is generally accepted at around 50% or more of trading activity.
- Reviewing the treatment of indirect non-controlling holdings in trading companies.
- Aligning the treatment of furnished holiday lets with that of Income Tax and CGT.
- Reviewing the treatment of limited liability partnerships to ensure they’re treated appropriately as part of the BPR trading requirement.
- Reviewing the current approach to eligibility of APR for farmhouses, particularly where a farmer leaves to receive medical treatment or go into care.
The report recognises the long term and far reaching effects on individual estates of these reforms and recommends that any changes are implemented through
legislation at a date far enough ahead for people to plan properly.
At this stage, these are simply recommendations, many of which are as open as “reviewing” current approaches. Until further details are available, it is
impossible to say whether the outcome will be better or worse than the current, quirky and complicated system.
In the meantime we continue to provide valuation reports and valuation advice in relation to inheritance tax and continue to monitor the progress of these