Inheritance Tax Reforms Announced
Reforms to the inheritance tax system are due to come into place from 1st January 2022, which HMRC expects to “cut red tape for more than 200,000 estates every year”.
As part of these changes, more than 90% of non-taxpaying estates will no longer have to complete inheritance tax forms when probate or confirmation is required.
The decision follows a review published in November 2018 by the Office of Tax Simplification.
This argued that the inheritance tax reporting system is “complex and old fashioned”, requiring 50% of estates to fill out forms even though fewer than 5% have tax to pay.
In an additional measure, HMRC announced that people who are required to submit inheritance tax returns will no longer have to provide physical signatures from all those involved. This requirement had been temporarily removed during the pandemic, but will now be made permanent.
Finally, HMRC said it would clarify the rules for inheritance tax accounts where the deceased was never domiciled in the UK but owned indirect interests in UK residential property.
John Bunker, chair of the private client technical committee at the Chartered Institute of Taxation, said he welcomed the fact that “many families in the aftermath of bereavement will be spared the additional stress of supplying unnecessary detail to HMRC”.
He added: “The challenge for HMRC will be to design a process that meets that aim and is fit for purpose in only nine months.”