Inheritance Tax  

Report calls for digital inheritance tax system

Report calls for digital inheritance tax system

The government should move to a fully digital system for inheritance tax, a report has recommended.

The Office of Tax Simplification today (November 23) released an 82-page document that had been commissioned by Chancellor Phillip Hammond earlier this year after he said in January he was concerned the system was "particularly complex".

The review’s key recommendation was that the government "should implement a fully integrated digital system for inheritance tax, ideally including the ability to complete and submit a probate application".

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The OTS said it realised a complete overhaul would be expensive and time consuming but set out some short-term recommendations in the interim.

It said: "Pending implementation of a digital system, HMRC should make changes to the current forms to reduce and simplify the administration of estates, including introducing a very short form for the simplest estates and updating the conditions that must be met to be able to complete a short inheritance tax form."

Another recommendation suggested a review of its IHT guidance to make it clearer and more concise, while the rest highlighted areas of automation and more joined up thinking between various government and tax departments to streamline payment and administrative processes.

The review contained a quote from a member of the public, which read: "I still have nightmares about it and welcome the chance to help secure changes that will ensure that others do not have to go through the same experience."

Today's report is the first part of the review, with the second section, which will deal with the overall design of the system, to be released in the spring next year, the OTS said.

The review "attracted an unprecedented level of engagement", the OTS said, including 3,000 online survey submissions from the general public. The responses pointed to overwhelming complexity within the IHT system.

Some 38 per cent of those responding online who had not used an adviser to negotiate executing a will or estate said they had spent 50 hours or more on administration.

Some 65 per cent of those not using an adviser said although they had no IHT to pay, they still were made to find and submit "significant" amounts of information.

In the introduction to the report, Angela Knight, chair of the OTS, and Paul Morton, the department’s tax director, said: "The key administrative recommendation is for the government to simplify this by giving renewed consideration to digitising and simplifying the necessary administration."

Rachael Griffin, tax and financial planning expert at Quilter, said the OTS had made some "encouragingly… obvious recommendations".

Ms Griffin said: "For instance, encouraging HMRC and HM Courts and Tribunals Service to allow low value and other simple estates the possibility of obtaining probate without submitting inheritance tax forms, or on submission of a very simple form."

The review also suggested HMRC revisited "the bizarre requirement", according to Ms Griffin, where trustees need to submit IHT forms even when no payment is due, and no reliefs or exemptions are claimed.