The caterwauling about inheritance tax reform was predictable.
Didn’t you hear?
The Chancellor of the Exchequer wrote to the heads of the Office for Tax Simplification (OTS) requesting a review of the inheritance tax regime. I’ve seen the letter: it’s seven sentences, of which only five are substantive, but the language of which counsel the wise not to hold their breath.
That the OTS exists agitates the soul. The existence of the office illustrates the point made in these pages over the years and months that our system of taxation is a mess. It is labyrinthine. It’s so worthy of Kafka as to bring to mind what an accountant acquaintance of mine, Neil Winkless, once said: ‘the thing with tax is that it’s so easy to lie [unintentionally].’
Our tax system pits one group of taxpayers against others. Other than the hopelessly poor, everyone belongs to several groups simultaneously. It makes for an angry body politic, especially at election time. We want exemptions, incentives and rebates for our interests, passions and sections.
If we’d set out to design a system that had as its central mission to harm democracy, to taunt fairness and to defy common sense, this would be the result.
National insurance is income tax by another name – so why does it still exist? In your local high street bakery, the gingerbread man with chocolate trousers is subject to VAT, but not if it has chocolate eyes. The tampon tax is mendacious. Capital gains tax and stamp duty rules only allow you and me only half a residential property.
This Voluntary Tax
We thus alight on the inheritance tax system, overdue reform, with its 119 rules, allowances and exemptions. Firstly, inheritance tax is a misnomer – the tax is a gift tax. Next, what act of violence on the English language results in IHT being a suitable abbreviation for inheritance tax? For those who wish advice, we can minimise inheritance tax, hence the saying ‘IHT is voluntary’.
The week before writing this, I amended Janis’s will on the birth of her son, Billy. To shorten a long tale, her original intentions to leave her estate to her partner had the potential for a hefty IHT bill. Her family was thus better off leaving her estate to her son.
The OTS would do its work, write a fine report destined for the back- burner. As Lesley Cox said: ‘We have one very big back-burner in this country right now’. The OTS has studied VAT, capital gains tax, corporation tax, the ‘gig economy’ etc.; like the beat, the list goes on. Of all these studies with elegant reports and press releases, then … nothing. The government has made no new regulations nor enacted or even proposed any legislation. What reasonable person would expect any inheritance tax reform?
For most, inheritance tax is mere misdirection, like a conjurer’s trick. Many who have no bother with IHT focus on it, but miss probate fees – fees set to be raised so high as to be a tax in all but name. Then there are care fees – a death duty by another name. There’s also capital gains tax. There’s more harm in those than IHT.
What’ll happen to such things as ISA, PEP, and pensions, as the rules differ for each savings vehicle?
Opinions are like… [shut your mouth]
Predictions are not unlike opinions. Inheritance tax yields £5bn – about the same as vehicle excise duty and insurance premium tax. IHT is twice as much as customs duties, air passenger duty, and betting and gaming duties. Some might say we pay these taxes without a murmur, so there’s no good reason inheritance tax should be different. Should the current system be changed, the lost revenue would have to be made up from some other source.
Inheritance Tax Reform, Don’t Count on It
I wager the current residential nil rate band (RNRB) would be altered and scrapped. I’ve said in months passed that it is evil – the work of halfwits. If they weren’t halfwits, they should be taken out and birched.
We’ll have a large backburner for a few years hence. We have to meet the times as they find us, so if you want to do your duty to your family, and not pay more IHT than they need to, I know a man who knows the ins and outs of the current rules and tells them as they apply to you.