Earlier this year the Office of Tax Simplification (OTS) was asked by the Chancellor of the Exchequer to conduct a wide review into inheritance tax (IHT), looking into it from both a technical and administrative standpoint. The report received a record amount of responses from a wide variety of people effected by IHT. Over 3000 responses made to an online survey, combined with a further 500 email responses and 100 written responses from experts responding to a call for evidence.
The OTS’s full findings will be published over two reports, with the first already having been published last week and a second scheduled for publication in Spring 2019.
The report highlighted some interesting aspects of IHT and estate administration that could be reviewed and simplified, making the task of dealing with probate and IHT forms much less frustrating.
The key recommendation made was for the government to implement a fully digital system for dealing with IHT forms, preferably alongside a means of applying for probate digitally. Currently most of the IHT forms can only be submitted by paper, and many people choose to complete them by hand as they’re difficult to complete digitally. Switching to an online system would hopefully streamline the process and bring it up to date. Interestingly, a recent change to probate procedure means that probate can already be applied for online in certain cases (see: https://www.willwriters.com/blog/sudden-changes-to-probate-procedure-announced/ ).
The OTS pointed out that the current IHT forms require a disproportionate amount of information. They can be a huge undertaking for lay executors especially, many of whom will never have acted as executors before and who will be grieving the loss of a family member at the time. While awaiting the implementation of a digital system the OTS further suggested simplifying the IHT forms themselves.
For the simplest of estates, a recommendation was made for an additional short IHT form (shorter than the existing short form!). This would be rolled in with a probate application form to reduce the administrative burden on executors for small estates where there is no IHT liability.
The OTS also identified problems with the guidance for the IHT forms. It is often difficult to navigate the substantial guidance and actually find the right answer. Worryingly some of the information is even contradictory at points with terminology not being consistent across all platforms. A general review of all guidance was recommended and would be of great benefit to the public.
An issue raised by both laypeople and professionals responding to the OTS’s call for evidence was the differing deadlines for payment of IHT and submission of the IHT forms. This is further compounded by the fact that a grant of probate cannot be obtained until the IHT is paid, but executors encounter difficulties accessing the deceased’s assets to pay the IHT without a grant! The OTS’s recommendation for this issue was for the government to consider implementing a method of confirming an executor’s authority before the grant is issued, allowing them to access the necessary information and funds.
This has only been a brief summary of some of the issues raised and the OTS’s recommendations. For the full report see https://www.gov.uk/government/publications/office-of-tax-simplification-inheritance-tax-review