Helping families with inheritance tax

Too many people have to fill in inheritance tax forms (IHT) and the process is complex, old fashioned and lengthy according to the Office of Tax Simplification (OTS) in the first part of a review published on 23 November 2018 at the request of the Chancellor of the Exchequer.

More than 3,500 people took part in a consultation on IHT with the OTS, far more than for any other review of this kind. Many of those who responded told the OTS that, at what is such a difficult time, they felt they were being asked to fill in complicated forms even where the relative who had died had only left a small amount.

Although inheritance tax is payable on less than five percent of the estates of the 570,000 people who die in the UK each year, around half of the families have to fill in the forms. Many also told us that their relative had worried about inheritance tax during their lifetime, even though it was not going to affect them.

The Office Tax Simplification is undertaking this two-part review of IHT in response to the request from the Chancellor of the Exchequer in January 2018.

The first report sets out an explanation of the issues and complexities of IHT. It gives an overview of concerns raised by the public and professional advisors during the review and then makes recommendations.

It examines the administrative issues that people complain about and which were raised in the responses. The second report covering other wider areas of concern to people will follow in spring 2019.

The first report highlights the benefits of:

• Not having to submit forms for smaller or simpler estates, especially where people
• Don’t need to pay the tax
• Simplifying the administration and guidance
• No more papers forms with a move online

Angela Knight CBE, the chairman of the Office of Tax Simplification, accepts that inheritance tax is both unpopular and complicated. She said: “The basic design of the tax itself is for government, but we can address the public’s concern at least make it easier for the families to fill in the forms. We have heard these comments loud and clear.

“The recommendations in this report will make it easier for the majority of grieving families with many not having to do the forms at all. The current process can seem overwhelming to people at a time when they are both preoccupied and distressed.”

Paul Morton, tax director, of the Office of Tax Simplification said that gathering deep engagement from the public and professionals involved in bereavement and death had been eye-opening. “This has been key to informing our new thinking of the tax and will underpin our progress now. The key recommendation is that technology should be used to provide a digital solution to transform the experience of those dealing with the tax on a day to day basis.”

During this review, the OTS consulted with a wide range of individuals and businesses, including funeral directors, affected by inheritance tax issues – and they received a record response. There were nearly 3,000 responses to an online survey, a further 500 emails from individuals and over 100 written responses from experts.

Some of the main issues highlighted to the OTS review were that:

• Completing forms is hard, and it can be difficult to work out which form to use
• The amount of information required can be disproportionate, especially in cases where no tax is due
• The guidance provided can be difficult to navigate
• People would like HMRC to provide receipts for tax payments

The OTS is the independent adviser to the government on simplifying the UK tax system, to make it easier for the taxpayer. It does not implement changes – these are a matter for government and parliament.

The OTS works to improve the experience of all who interact with the tax system. It aims to reduce the administrative burden – which is what people encounter in practice – as well as looking to simplify the rules. Simplification of the technical and administrative aspects of tax are important, both to taxpayers and to HMRC.

This feature was originally published in the January 2019 issue of Funeral Service Times