A move to simplify inheritance tax (IHT) reporting requirements has received a mixed response from l...
A move to simplify inheritance tax (IHT) reporting requirements has received a mixed response from life offices.
HM Revenue & Customs has launched a consultation on proposed rules which would remove the requirement to fill out an IHT100 form in the 2007/08 tax year in certain circumstances. The concession would apply to those who make a gift, which is a chargeable transfer of less than £210,000, unless they have made other chargeable transfers in the last seven years which take them over that threshold in total.
At present, gifts over £10,000 to most trusts require an IHT100 form, even if no IHT is due. In addition, IHT forms might be required at the ten-year anniversary of the trust, again even if no IHT is due at the time.
Gerry Brown, technical manager at Scottish Life International, said the proposals represented a missed opportunity to simplify the IHT code even further.
He said, although HMRC had taken a step in the right direction, it had not gone far enough: "Why should there be any reporting requirement unless there is an actual liability? Tax legislation is complex enough and the government should be trying to simplify it wherever possible. The extra reporting is just a tremendous amount of work for nothing."
Brown was also critical that HMRC was considering asking for details of the value of assets in the hands of the transferer before the transfer. He said: "IHT liability is calculated on the 'loss to estate' principle. Why complicate matters by introducing a new valuation basis simply for reporting purposes?"
However, Elaine Cruick-shank, tax and trusts technical manager at Aegon Scottish Equitable, said it broadly welcomed the move. She said it would potentially reduce the tax compliance burden and cost for clients who decide to make a chargeable lifetime transfer by setting up a discretionary gift trust or a discretionary discounted gift trust.
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