Regulation  

Tyrie slams new inheritance tax rules

Tyrie slams new inheritance tax rules

The chairman of the Treasury select committee has written to the chancellor expressing concerns that his inheritance tax reforms have made the system more complex.

Andrew Tyrie wrote to George Osborne to tell him the new transferable main residence nil rate band failed the tests of being simple, clear and fair.

He said: “The issue is of growing importance. The tax is no longer the exclusive concern of the very wealthy; over the course of a lifetime, more than a million estates will be affected, largely representing strivers who, after decades of hard work, have accumulated enough to pass something on to their relatives.

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“The inheritance tax provisions were already long and extremely complex prior to the July Budget.

“Many of them are now impenetrable to all but professional tax advisers. High street accountants are likely to struggle. Traps lie everywhere in the detail.”

The Office for Budget Responsibility has forecast the number of deaths subject to inheritance tax will more than double in the period between 2013 to 2014 and 2018 to 2019, reaching 54,500 – or 10 per cent of deaths.

In October, the latest publicly available data on tax receipts showed 2012 to 2013 saw inheritance tax paid on 17,900 estates with a total bill of £3.05bn – a 15 per cent increase on the £2.65bn total paid in the previous tax year.

In the 2015 Summer Budget, the government announced it will phase in a new residence nil-rate band from 6 April 2017, when a residence is passed on death to a direct descendant.

Together with the inheritance tax nil-rate band - set at £325,000 - and the ability to transfer unused main residence nil-rate band to a surviving spouse or civil partner, this allowed Mr Osborne to claim there will be an effective inheritance tax threshold of £1m in 2020 to 2021.

Responding to Mr Tyrie’s letter, Mr Osborne said: “I agree that we should always strive for simplicity in the tax system where possible but I do not believe the inheritance tax system in the UK is any more complex than most comparable systems.

“You may be aware that several other countries, such as Germany, France and Italy, also provide preferential treatment for inheritances left to members of the immediate family.”

He added that the policy would mean 94 per cent of estates would have no inheritance tax liability by 2020.