The chairman of the Treasury Select Committee has written to the chancellor asking him to consider the problems posed by the complexity of current proposals to extend the inheritance tax relief for residential properties.
As announced in George Osborne’s Summer Budget, a residence nil rate band was legislated for in section nine of the Finance Act 2015, applying where property which has been occupied as a residence is passed to direct descendants of the deceased on or after 6 April 2017.
For deaths in 2017 to 2018, the rate of the RNRB is £100,000 but the maximum amount of this new band will rise in £25,000 stages to £175,000 in 2020 to 2021.
Any unused band will be transferrable to a spouse or civil partner.
If the first death occurred before 6 April 2017 and the second death is after 5 April 2017, the RNRB at the time of the first death is deemed to be £100,000 - with a tapered withdrawal of the band for estates valued at more than £2m.
Andrew Tyrie stated the chancellor should think again about the proposals, branding them “a mess of complexity and uncertainty” and adding they almost certainly do not need to be in order to achieve the government’s objectives.
“The further policymakers lose sight of simplicity, the more taxpayers are forced to spend money on the only people capable of making sense of their affairs – tax accountants and lawyers.
“The danger must be that rules this complex will make tax accountants and lawyers the main beneficiaries.”
The TSC chairman argued the proposals also bring a lot of uncertainty, pointing out that until the downsizing rules are laid in statute – not likely to occur until later in 2016 – elderly homeowners will have no basis on which to plan.
He said: “Many elderly homeowners will reasonably want to plan now. The more guidance that they can have in the next few months, the better.
“Property price inflation has caused inheritance tax to bite on people who are by no means ‘wealthy’; the government is right to tackle the problem,” Mr Tyrie added.
peter.walker@ft.com
