The recent publication by The Office of Tax Simplification of the second part of its report on inheritance tax made the headlines in most papers. The most quoted point was the suggestion that the period for the exemption of life time gifts should be reduced from 7 years to 5 years. The Office’s research showed that executors had great difficulty in assembling records for a 7 year period and that often banks do not keep bank statements going that far back. The reduction would be a welcome simplification.
There were also sensible suggestions about simplifying the various rules about exemptions for gifts. The most obvious would be the replacement of the existing exemptions with a simple annual personal gift allowance. If the current £3,000 limit were to be increased to reflect inflation, it would amount to just under £12,000.
So given the present political situation and the pressure on parliamentary time, it seems unlikely that the current complicated regime will be improved in the near future. It is important therefore that executors take professional advice if there have been lifetime gifts so that the correct treatment can be applied when the inheritance tax forms are submitted.