Is it time to simplify the Inheritance Tax process?

Year Published: 2018

The Office of Tax Simplification (OTS) published its Inheritance Tax Review in November 2018. The review demonstrates that changes desperately need to be made to the administration process.

The purpose of the report:

Helen Kelly, Partner at SAS Daniels

Helen Kelly, Partner at SAS Daniels

Dealing with estate administration often places a huge burden on executors. The OTS recognises that the responsibility of dealing with the estate is often placed on a family member or friend at a very emotional time and the current system is causing many people additional stress during this process. The purpose of this particular review was to look into the experiences of executors and to address the particular challenges they are facing.

Current issues with the inheritance tax process:

The OTS reports that there were £588,000 deaths in the UK in 2015/16 and inheritance tax forms were completed by just under half of these. This is particularly high considering that there were actually only £24,500 estates attracting inheritance tax. Executors are therefore having to fill in lengthy forms despite tax not always being due.

Furthermore, the OTS has discovered that many executors are confused about which forms to use because guidance is not worded in an accessible way for the general public. Executors are also finding the actual completion of the forms incredibly challenging due to the large volume of information required. This is especially frustrating in cases where no inheritance tax is due. The survey undertaken by the OTS indicated that 38% of individuals were spending 50+ hours administering an estate and 12% were spending over 100 hours.

Recommendations for improving the inheritance tax process:

  • Introduce a digital system for inheritance tax and probate with the ability to complete and submit forms online
  • Reduce the amount of information required for a simple estate, for instance making a shorter form for low value estates
  • Review the requirement for trustees to submit forms where there is no inheritance tax due
  • Make it easier to obtain probate for a low value estate
  • Producing clearer guidance for executors by using worked examples and case studies as well as an online tax calculator tool
  • Issue automatic receipts for information received

These recommendations will be followed by a second report in Spring 2019 concerning the structure of the inheritance tax system and will focus more specifically on reliefs that are available. For the time being, it is apparent that the current system needs to be streamlined and better explained for executors. Overall, the OTS recommendations certainly seem to be heading in the right direction for achieving this.

For advice on the inheritance tax process, please contact Helen Kelly in our Trusts team on 0161 475 7685.

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