Inheritance Tax reporting to be simplified
Following recommendations by the Office of Tax Simplification, reporting regulations will be updated by the government later this year. The new rules that will come into effect from 1 January 2022, will mean that nine in 10 estates that are not subject to Inheritance Tax (IHT) will no longer need to complete IHT forms as part of the probate process, thereby reducing the administrative burdens for those dealing with inheritance tax.
Furthermore, a temporary measure that is currently in place for those dealing with a trust or estate that allows IHT returns to be submitted without a physical signature will become a permanent change.
The HMRC also issued guidance for the first time on what it considers to constitute a spouse or civil partner for the purpose of IHT. Within the inheritance tax manual, under the Spouse or civil partner exemption: definition of spouse and civil partner, it specifically states that cohabiting partners, not in a marriage or civil partnership, are not recognised in the IHT rules.
In further response to the report, the OTS published a letter it received from the Financial Secretary to the Treasury (FST) on behalf of the Chancellor in response to its first report on Inheritance Tax, in which Financial Secretary to the Treasury, The Rt Hon Jesse Norman MP said:
“I have asked my officials to continue work on the remaining recommendations: for digitisation, improving processes for lifetime and trust charges, guidance, and working with court services. Some of these are longer term in nature, and will be taken forward as part of the wider Tax Administration strategy.”
“The Government will respond to the recommendations made in your second Inheritance Tax report on simplifying the design of inheritance tax in due course.”
Who is The Office of Tax Simplification?
The Office of Tax Simplification (OTS) is the independent adviser to government on simplifying the UK tax system. The work of the OTS is rooted in improving the experience of all who interact with tax. The OTS aims to improve the administrative process – which is what people encounter in practice – as well as simplifying the rules.
Expert Inheritance Tax Guidance
We understand that Inheritance Tax and Estate Planning can seem daunting and whilst simplification to the rules is a welcome change, this is still a complex area of law that affects all of us in one way or another and we would always recommend that you seek the advice of a professional when it comes to Inheritance Tax Planning, compliance with the rules, Estate Planning or Probate.
Our Specialist Estate and Tax planning solicitors at Larcomes can provide comprehensive solutions, tailored to your individual needs, ensuring all legal tax rules are followed. We work closely with other departments across the firm, including our Property, Family law and Commercial law team, so that we can provide you with clear, up-to-date, professional advice on how to plan ahead for your future and for that of your beneficiaries.
To speak with one of our Tax, Wills and probate team please give us a call on 023 9244 8100 for our Portsmouth office or 023 9224 6666 for our Waterlooville office or make an online enquiry