Chancellor Philip Hammond's plans to simplify inheritance tax may end up further complicating matters, tax specialists have warned.
Speaking to a packed audience at the FTAdviser Tax Efficient Investment seminar, Sally Boyle, head of marketing for tax-efficient investments at Octopus Investments, expressed scepticism about whether Mr Hammond's desired simplicity would actually achieve what it aims to do, and be delivered in a meaningful way to investors.
"We have found 'simplification' does not always mean 'simplification'," she said.
On Tuesday (30 January), the chancellor announced he had written to the Office of Tax Simplification (OTS), with a view to rethinking the inheritance tax (IHT) regime.
The idea behind his letter is for the OTS to focus on ensuring the system is fit for purpose and to make the experience of those who interact with it as smooth as possible.
Jack Rose, head of the tax-efficient division for LGBR Capital, agreed: "I always feel a bit of trepidation whenever I hear the government is talking about simplification.
"It is clear the tax system is becoming harder and harder and we'd want to look more closely at the outcomes of the review."
The standardisation of the rules between VCTs, EIS and SEIS may seem obvious but generally the levels of risk are very different for all of them. Jack RoseRichard Hoskins, co-founder of Kin Capital, agreed, adding that there could be an ulterior motive to the chancellor's request. He explained: "I don't think this is really about simplification.
"Given how big the UK's deficit is, I think who knows what will happen [as a result of the review into IHT]."
The UK current account deficit was at £22.8bn in the third quarter of 2017, at 4.5 per cent of GDP.
Fellow-panellist Sam Plumptre, chief executive for investment platform Co-Investor, commented that if it does make it "easier for the average person to understand", then he was all in favour of some measure of simplification to the current regime.
Last year, the OTS identified IHT last year as one area it particularly wanted to tackle. It is understood that any review will be wide-ranging and will focus on the technical and administrative issues within IHT, such as the process of submitting returns, the way in which gifts are used, and paying any tax due, as well as practical issues around routine estate planning and disclosure.
However, some industry commentators have expressed concern the review might also curtail the way in which gift rules interact with the wider IHT system, and whether it might affect any decisions surrounding transfers, investments and other transactions which investors currently make.
Ms Boyle was not worried that any changes to the IHT regime would affect the use of business property relief (BPR), which is popular among advisers and wealthier clients as a means of mitigating IHT through investing in qualifying companies.
She added: "We speak to government a lot and, as with any of these things, it seems that as long as BPR does what it is intended, namely ensure people invest in BPR-qualifying investments and therefore give money back into the British economy, they will be happy for this relief to continue."
Mr Hoskins added: "Providing the money generated by having this [tax] relief is going in the right direction, then there should be no problem".
Jeremy Mindell, director of Primondell, asked whether, given venture capital trusts (VCTs), enterprise investment schemes (EIS) and seed enterprise investment schemes (SEIS) were always talked about in the same category, there should be a simplification of the tax elements around all three.
In response to whether "one rule should bring them all and in the tax band bind them", Mr Rose said: "The standardisation of the rules between VCTs, EIS and SEIS may seem obvious but generally the levels of risk are very different for all of them, so making one tax rule for them all will be difficult."
This is because the government will reward with higher tax reliefs those investors who are willing to put all their money at risk to boost British companies.
"There could be more harmonisation in terms of the products, for example bringing the investment limits more into line", Mr Rose added.
Geoffrey Todd, a partner in the private client and tax team at Boodle Hatfield, said: “As the chancellor noted, IHT is a ‘particularly complex’ tax and the current system is rife with inconsistencies.
"Any genuine simplification of the way it operates and is administered and which helps ease frustrations and delays in settling IHT related matters with HMRC has to be welcomed provided that fairness is also maintained."
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