HMRC report into the use of Inheritance Tax Reliefs
It has for some time been common knowledge that HMRC had commissioned a report into the use of inheritance tax reliefs – not least because a number of professional firms were circulated to ask for their participation in the report and shared that information with other advisers.
The report was published on Budget day. There was no mention of inheritance tax in the Budget which may mean the report is currently under consideration, or may merely be coincidental.
Like other such reports, the sample of interviewees was quite narrow, comprising 46 taxpayers (a mixture of testators and beneficiaries) and 34 professionals split roughly equally between solicitors and accounts/tax agents.
In summary, the findings of the report were:
– Understanding of inheritance tax rules and reliefs amongst the testators and beneficiaries was quite low
– The key objectives of estate planning were directed towards ensuring the continuation of the business, keeping it in the family and protecting employment. Reducing IHT was seen as a means to support these objectives rather an objective in its own right
– “Most instances of APR/BPR appeared to be genuine and in keeping with policy objectives”
– Purchasing assets specifically to secure IHT reliefs was rare and generally against the advice given by agents
– In most cases the beneficiaries continued running the business after the inheritance rather than selling the assets.
Commenting on the report, MHA Moore and Smalley Tax Partner, David Bennett remarked “This seems a very fair and balanced report and backs up what we in the profession have long felt: Agricultural and Business Property reliefs help keep family farms and businesses intact and protect jobs. Reports of abuse are often exaggerated, and in reality the reliefs normally do what the government intended”.