Jenny Cutts, head of the private client team and Partner at Wedlake Bell, comments: “Despite the hype, and the deficit, the government's tax day failed to address areas previously flagged for reform.
"For IHT, reform is long overdue with a draconian tax rate of 40 per cent, and a complex and outdated system of reliefs and exemptions."
She points to the APPG recommendation to simplify IHT with a reduction or reliefs and exemptions combined with a lower, flat "life-time" rate of 10 per cent as a 'missed opportunity'.
She adds: "The most tax day offered was a cut in paperwork for non- taxable estates with a value of up to £1m. Although this step is welcome, an opportunity has been missed to introduce more meaningful reforms."
According to George Bull, senior tax adviser for RSM UK, the chancellor really ought to "bring forward proposals adopting some of the recommendations of the OTS:
These might include:
- Abolishing the exemption for normal gifts out of income, the scope of which is often disputed, and which requires extensive record-keeping; and
- Replacing some of the smaller exemptions and allowances with a higher overall personal gift allowance.
"Both of these proposals would be relatively simple to introduce in the short-term and could well encourage people to make more lifetime gifts", Bull says.
Changes to limits on lifetime giving and trust tax
One of the documents released by the government this week is a summary of responses to the 2018 consultation ‘The Taxation of Trusts: A Review’.
The responses did not indicate a desire for a comprehensive reform of trust tax at this stage, but the Treasury has said the "government will keep the issues raised under review".
In the 22-page responses document, the government outlined how many of the 100 responses to the 2018 consultation had stressed the positive role trusts play in society, and explained that trusts are often the most appropriate legal mechanism for passing on, or managing and protecting, wealth and assets.
The document stated: "They commented on how the current tax rules can be perceived as creating barriers to using a trust.
"The main areas where respondents sought reform concerned income tax and IHT.
"When considering income tax, respondents were mostly concerned about complexities in how the tax is administered, whereas regarding IHT, respondents were generally concerned about unfairness and complexity."
But while these were acknowledged, there appears to be no change to the rules around trusts or gifts - at least for now.
Or rather, just one: the current rule allowing those dealing with a trust or estate to provide an IHT return without requiring physical signatures from all those involved will be made permanent.
Bull comments: "We may see some limits to lifetime gifting which many countries have and removal of capital rebasing on death. We have had a review of IHT and recommendations made by the Office for Tax Simplification, but these have seem to have been largely put to one side.