Legal News | 24.09.20
Eat Out to Help Out… Now it could be Pay Tax to Pay Back
Government borrowing has increased significantly because of the Coronavirus pandemic with the Chancellor’s Eat Out to Help Out scheme alone estimated to have cost more than £500 million. It is no surprise, therefore, that the media is warning of tax rises to come and inheritance tax (IHT), having been the subject of two recent reviews, could be ready for reform.
In its report last year, the Office of Tax Simplification (OTS) made several recommendations to the Government as to how IHT ought to be reformed. Included within these is the recommendation that the current seven years rule be reduced to five years so that lifetime gifts made more than five years before death would be exempt from IHT. This may seem like a good idea but the OTS also recommended abolishing taper relief which, under current rules, reduces the IHT payable on substantial lifetime gifts where the deceased survived them by more than three years. The OTS also recommended replacing the myriad exemptions for lifetime gifts with one personal gifts allowance.
In its report earlier this year, the All-Party Parliamentary Group for Inheritance and Intergenerational Fairness (APPG) went further, recommending that the Government abolish IHT altogether and replace it with a flat-rate gift tax. The APPG recommended a rate of 10% on all lifetime gifts and a rate between 10% and 20% on death. Individuals would have an annual gifts exemption (£30,000) and a death allowance similar to the current nil rate band (£325,000). The only exemptions would be for gifts to spouses and civil partners (up to a limit) and gifts to charities. The current agricultural property relief (APR) and business property relief (BPR) would be abolished in their entirety.
Although we will not know the details of any IHT reform until they are announced by the Government, Wansbroughs will be sure to keep you informed of developments and the tax planning opportunities they present. In the meantime, if you have any questions, please do not hesitate to contact your usual Wansbroughs contact or e-mail firstname.lastname@example.org