The Office for Tax Simplification have completed a review of inheritance tax and have recommended that fewer people should pay tax on gifts shortly before death. They propose reducing the 7 year rule to 5 years. They also suggest an overall personal gift allowance, but did not suggest an amount.
It is disappointing that they did not make any further recommendations or proposals. Inheritance tax rules are over complicated and as a Private Client Solicitor I would like to see recommendations in relation to the nil-rate band, the residence nil-rate band and the treatment of trusts. The proposals could go so much further to make significant changes to overhaul the system.
The rules could be simplified to make inheritance tax less complex and therefore avoid confusion.
Changes to inheritance tax leave major problems unresolved and will not lead to wholesale change, solicitors have claimed.
Last week an independent review by the Office for Tax Simplification (OTS) recommended that fewer people should pay tax on gifts given shortly before death in order to cut down on administration.
One of its main proposals involved trimming the seven year rule to five years. This would mean that assets given away more than five years as opposed to seven years before the original owner died are not subject to inheritance tax.
According to the OTS, seven years is an awkward time frame as bank statements more than six years old can be difficult and time consuming for executors to obtain.
The OTS also stated that current gift exemptions are complex and create confusion.