Vale & West Chartered Accountants Blog

IHT tax rules could be overhauled

The number of people forced to calculate and submit complicated inheritance tax (IHT) forms could be slashed after a report from the Office for Tax Simplification (OTS) recommended a series of changes.

The OTS said that the rules should be simplified to make the UK’s ‘death tax’ rules fairer. These changes could relieve the burden on executors, who will often have to pay large inheritance tax bills before they can recover money from the estate.

According to the report, some 275,000 executors need to file IHT tax forms every year even though the tax is paid by just 25,000 estates. In addition, almost half those who act as executors spend at least 50 hours administering the deceased person’s estate.

Of those who submitted paperwork to HM Revenue & Customs (HMRC), 61 per cent had no idea how long they would have to wait for the forms to be returned and around 75 per cent did not recall HMRC acknowledging their paperwork. They also claimed that arranging probate and understanding and completing the forms were the most time-consuming parts of acting as executor.

The key recommendations from the report, which is the first of two, were that a system should be created whereby IHT forms could be completed and submitted as part of a probate application. The forms should also be simplified, the OTS said, particularly for smaller and more straightforward estates.

Finally, the OTS recommended that the Government’s IHT website should be overhauled and that receipts should be given automatically to executors so that they can be assured IHT forms have been received, along with any payments.

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