The current review of the Inheritance Tax (IHT) system by the Office of Tax Simplification (OTS) could be of particular relevance for farmers and the landed estate sectors.
In its scoping document, the OTS says that the overall aim of the review will be to identify opportunities and develop recommendations for simplifying IHT from both a tax technical and administrative standpoint.
The current IHT system has become very much part of the tax planning process and has an impact on reliefs available. Therefore, the review could have major implications on the rural sector and agricultural enterprises, as it is also looking at around five per cent of taxpayers with land and rural properties.
This is because individuals with an estate that exceeds £2 million will not qualify for the residence nil rate band (RNRB), which could be particularly relevant to farming businesses.
On the other hand, there are planning options available, which include lifetime planning, such as the creation of trusts and lifetime gifts. A recent example of where this has caused controversy was after the death of British landowner and billionaire Gerald Grosvenor in August 2016, who paid no IHT on his £9.35 billion fortune as it was held in trusts, which are only taxed at a special rate once a decade.
The scope of the review includes the process of submitting IHT returns, gifts rules and their annual thresholds, administrative and practical issues around estate planning, compliance and disclosure.
It is also investigating the complexities arising from IHT reliefs, the impact of taxpayer decisions, investments because of IHT rules and the perception of the complexity of IHT rules among various stakeholders.