Simplify inheritance tax process for bereaved families, says OTS

The Office for Tax Simplification (OTS) has called on HMRC to reduce or remove the requirement to submit inheritance tax forms for smaller or simpler estates.

Every year hundreds of thousands of people needlessly have to fill in inheritance tax (IHT) forms, a process the Office for Tax Simplification (OTS) has described as ‘complex’ and ‘old-fashioned’.

The OTS has recommended reducing or removing the requirement to submit forms for smaller or simpler estates as part of its review into IHT, which was ordered by chancellor Phillip Hammond at the start of 2018.

In the first of a two-part report (the second of which will be released in the spring of 2019), the OTS has urged the government to implement a fully integrated digital system for IHT, including the ability to complete and submit a probate application. Probate is not granted until IHT is paid, so therefore IHT forms need to be filled out and submitted even when there is no IHT to pay.

Feedback from the public to the OTS described the process as time-consuming and stressful, due to the amount of information HMRC requests.

Under a digital system, it adds that HMRC should make changes to the current forms to reduce and simplify the administration of estates. The OTS recommends introducing a very short form for the simplest estates, while for other estates the burden should potentially be removed entirely.  

At present, of the 570,000 people who die in the UK each year, around half of the families have to fill in the forms. The majority, though, are not liable to pay IHT. In fact, just 5% of estates are caught by the death tax.

Angela Knight, chairman of OTS, says: “Inheritance tax is both unpopular and complicated. The basic design of the tax itself is for government, but at the OTS we can address that most frequent of all comments and at least make it easier for the families to fill in the forms.

“The OTS has worked on ways to address these practical complexities, which have come through loud and clear.”

She adds: “The recommendations will make it easier for the majority, and would mean that in future, many may not have to do the forms at all. Improving the administration of this tax in these ways is important, as having to deal with the current process can seem overwhelming to people at a time when they are both preoccupied and distressed.”

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