Inheritance tax: reduced reporting requirements
Who will be affected
Personal representatives administering estates in England and Wales, Scotland and Northern Ireland.
General description of the measure
This measure widens the circumstances when all inheritance tax (IHT) accounts do not have to be submitted to HMRC for estates where the deceased was domiciled in the UK, and reduced simplified information which is reported instead.
It also clarifies the reporting requirements for estates where the deceased has never been domiciled in the UK and aligns the period during which HMRC can investigate estates where accounts are not required to 60 days from the date approval or confirmation (in Scotland).
The measure will reduce IHT reporting burdens for more than 90% of non-taxable estates requiring probate or confirmation, and ensuring estates are not exempt from delivery IHT accounts where the deceased has never been domiciled in the United Kingdom and IHT is of.
Context of the measure
This measure implements a commitment made in the command document “Tax policies and consultations spring 2021” (PC 404, March 2021) to reduce administrative burdens for those who process IHT. This followed the recommendations of the Office of Tax Simplification in its first report on inheritance tax, published in November 2018, that the conditions that must be met in order to be able to complete a short IHT the form needs to be updated.
The measure will come into force and will apply to deaths from January 1, 2022.
Section 256 of the Inheritance Tax Act 1984 gives HMRC the power to pass regulations exempting the delivery of IHT accounts as specified or determined under the regulations.
The regulations for this purpose are the Inheritance Tax (Issuance of Accounts) (Excluded Estates) Regulations 2004 (SI 2004/2543) (as amended). Basically, they provide for 3 categories of excluded goods:
- low value estates excluded (rule 4 (2))
- excluded estates exempt (rule 4 (3))
- foreign direct debits (rule 4 (5))
Article 6 prescribes the information to be produced instead of a IHT account, and Regulations 8 and 9 provide for when a person providing such information is exempt from tax.
For low value and exempt exempt estates, the information to be produced instead of a IHT account is simplified and the corresponding monetary limits are increased as follows:
- the limit for all taxable transfers and ‘normally non-income’ transfers made before death is increased from £ 150,000 to £ 250,000
- the limit for taxable trust property is increased from £ 150,000 to £ 250,000
For exempt estates, the limit of value in relation to the gross value of the estate is increased from £ 1million to £ 3million, with the total amount of trust property, including exempt amounts, being limited to £ 1million.
For estates with foreign domiciliations, the revisions make it clear that the estate is not an estate except if taxable gifts greater than £ 3,000 in a year have been made in the 7 years preceding the death, or s ‘it contains overseas property the value of which is attributable to UK residential property.
The meaning of ‘IHT threshold ”is revised to reflect the IHT zero rate band multiplier when less than 100% of a IHT the zero rate bracket is transferred to the deceased.
The time limit for the three British judicial services to transmit the information produced instead of a IHT account at HMRC is extended from 1 week to 1 month, and the period during which HMRC can investigate the estate is aligned to 60 days from the granting of probate or confirmation.
Summary of impacts
Chessboard impact (millions of pounds sterling)
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This measure should not have an impact on the chessboard.
This measure is not expected to have significant macroeconomic impacts.
Impact on individuals, households and families
This measure will have a positive impact on around 230,000 tax-exempt excluded estates by simplifying the information to be provided to HMRC by their personal representatives and, as part of the associated process reforms, removing the need to send forms to HMRC regarding these. estates. when the deceased was domiciled in the United Kingdom at the time of death. This will reduce the administrative burden on families at a difficult time when a family member has passed away.
Changes to monetary limits and other rules will remove personal representatives administering an additional 10,000 non-paying members. IHT successions of the need to complete a IHT Account.
We estimate that approximately 40% of estates affected by these changes (approximately 95,000 per year) are administered by personal applicants (the remainder using attorneys and probate practitioners).
This measure should not affect the formation, stability or break-up of the family.
Impacts on equality
HMRC does not hold equal information on individuals making personal requests, but it is not expected that there will be any impacts on groups sharing protected characteristics.
Impact on businesses, including civil society organizations
We estimate that approximately 60% of the 240,000 estates affected by this measure per year (approximately 145,000 per year) are administered by probate practitioners and attorneys who will be affected in the same way as for personal applicants (see “Impact on individuals, households and families”) for each area for which they act.
As a result, the customer experience will improve. This is expected to significantly reduce the ongoing costs for these businesses, which will no longer need to complete the required forms on behalf of their clients and return them to HMRC. This impact will be kept under review thanks to the commitment of stakeholders.
One-time costs will include familiarization with the changes. We do not expect that there will be ongoing costs.
There should be no impact on civil society organizations.
The revisions will require changes to the forms and guidelines. HMRC will incur an estimated operational costs of £ 600,000 to effect these changes.
The revisions will impact the forms used to obtain approval or confirmation. The HMRC is working with the HM Courts and Tribunals Service, the Scottish Courts and Tribunals Service and the Northern Ireland Courts and Tribunals Service on the necessary changes.
Other impacts have been taken into account and none have been identified.
Monitoring and evaluation
The measurement will be monitored using information gathered during compliance checks.
If you have any questions about this change, please contact Alan Hackney by email [email protected] or by phone on 03000 562716.
Rt Hon MP Lucy Frazer QC, Financial Secretary to the Treasury, has read this tax information and impact note and is confident that, given the available evidence, this represents a reasonable view of the costs, benefits and likely impacts of the measure.