Tax & Estate Planning

IHT goes digital

By November 27, 2018 No Comments

The first of two reports from an Office of Tax Simplification (OTS) review has called for an overhaul of the current inheritance tax (IHT) system, including scrapping forms when there is no tax to pay.

Although Inheritance Tax is payable on less than 5% of the estates of the 570,000 people who die in the UK each year around half of families have to fill in the forms; individuals can either complete the forms themselves or employ an adviser to do this on their behalf.

As a result, the OTS, which is an independent adviser to the Treasury, is calling for the reduction or removal of the requirement to submit forms for smaller or simpler estates, especially where there is no tax to pay.

Continuing our theme of Digitalisation, to further simplify the process, the OTS has highlighted the need to automate the system. IHT forms are currently mostly offline; the OTS report said: ‘A fully digital system is required to allow executors or their advisers to provide information directly to HMRC. This would be an entirely different experience to the current form-filling exercise carried out by executors.’

The OTS said it envisages an online portal, like the Self-Assessment Income Tax system, to replace the two separate IHT forms with one simplified and guided process.

OTS tax director Paul Morton said: ‘The key recommendation in this report on the administration of the tax, as with other work of the OTS, is that technology should be deployed to provide a digital solution to

transform the experience of those dealing with the tax on a day-to-day basis.’

OTS chairman Angela Knight said: ‘Inheritance tax is both unpopular and complicated. The basic design of the tax itself is for government, but at the OTS we can address that most frequent of all comments to at least make it easier for the families to fill in the forms.

‘The OTS has worked on ways to address these practical complexities, which have come through loud and clear.’

So, no announcements on restructuring IHT, yet, but hopefully it will be easier to deal with HMRC in administering estates and obtaining Probate on the passing of a loved one.