Philip Hammond has ordered a review of the "complex" inheritance tax system

 
Courtney Goldsmith
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Philip Hammond ordered a review of inheritance tax (Source: Getty)

The chancellor has called for a review of inheritance tax, asking the Office of Tax Simplification (OTS) to make sure the system is "fit for purpose".

Philip Hammond called the system "particularly complex" and asked the OTS, an independent arm of the Treasury, for proposals to simplify it.

"I would be most interested to hear any proposals you may have for simplification, to ensure that the system is fit for purpose and makes the experience of those who interact with it as smooth as possible," Hammond wrote in a letter dated 19 January.

Read more: Inheritance tax reaches another record with £4.9bn receipts

Hammond said the review should focus on technical and administrative issues, including the process of submitting returns and paying any tax due, as well as practical issues around routine estate planning and disclosure.

He also said it should look at gifts rules and whether the current framework distorts peoples' decisions on transfers, investments and other relevant transactions.

In the 2016/17 tax year, HM Revenues and Customs received £4.84bn in inheritance tax, £16m of which was not paid in cash but in transfers of assets ranging from artworks to property, according to Hargreaves Lansdown.

Sarah Coles, a personal finance analyst at Hargreaves Lansdown said: “Anyone who has ever wrestled with estate planning and inheritance tax can appreciate that the whole system can be a nightmare of complexity.

"The pension freedoms and the additional residence nil rate band may have reduced IHT [inheritance tax] for many, but they have made things much more complicated rather than less, so it’s about time someone took a big red pen to the myriad of rules and regulations," Coles said.

Read more: London households at risk from Labour reversal on inheritance tax

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