Simplifying Inheritance Tax – where do you start?
Philip Hammond, our beleaguered Chancellor of Exchequer, has taken some time off from his Brexit woes to refer inheritance tax to the Office for Tax Simplification. Not many people know about the OTS. It seems an unlikely creation, something like an Office for Finding Needles in Haystacks. You just know it is never going to work. Over the post war years English tax law has become increasingly complex at ever increasing speed. A tip for Brexiteers: make a serious commitment to overhaul and really simplify the English tax system.
Now let us turn away from fantasy and try to examine Mr Hammond’s motives. I am sure he thinks tax simplification is excellent – like pancakes on Shrove Tuesday. It is, like most UK taxes, immensely complicated, the most recent tweak being the addition of an unfair extra allowance for people who are able to leave residential houses to their children and certain other close relatives. Too bad if you do not have any children! A major simplification would be to raise the inheritance tax free allowance to £500,000 for everybody. Or why not follow the example of progressive Sweden and abolish the tax altogether. What could be more simple than that? My cynical colleagues believe that the true motive must be to increase the tax so perhaps we will see the abolition of agricultural business relief and business property relief. They are complicated but they reduce the amount of tax the Exchequer takes. Simply abolish them!
In any event we look forward with great interest to learning whether the OTS will live up to its name.