Simplification of reporting obligations in matters of inheritance tax

New rules will come into force from 1 January 2022 to simplify current compliance with inheritance tax regulations.

Reporting regulations will be simplified later this year, so that from January 1, 2022, more than 90% of non-taxable estates each year will no longer have to complete inheritance tax forms for deaths when homologation or confirmation is required.

In addition, the current temporary provision allowing persons dealing with a trust or estate to provide an estate tax statement without requiring the physical signature of all affected persons will become permanent.

Reporting regulations will also be updated to clarify the requirement for estates to submit an inheritance tax account where the deceased was never domiciled in the UK but had indirect interests in UK residential property. .

John Bunker, Chairman of CIOT’s Private Client (UK) Technical Committee, commented: “We welcome that, as part of the implementation of the OTS recommendations ‘to improve the client journey’ for IHT, many families following a bereavement will be spared the added stress of providing unnecessary details to HMRC.

“The change will mean that only around 15% of estates will need to complete some form of IHT declaration.

“The challenge for HMRC will be to design a process that meets this objective and is fit for purpose in just nine months.”

Treasury Financial Secretary Jesse Norman confirmed the changes in a letter to the Office of Tax Simplification, saying the Treasury would continue to review possible inheritance tax changes.

Norman said: “I have instructed my officials to continue working on the remaining recommendations: for digitization, process improvement for life and trust charges, advice and collaboration with court services. Some of these are longer term in nature and will be pursued as part of the tax administration’s broader strategy. The government will respond to the recommendations made in your second Inheritance Tax Report on simplifying the design of Inheritance Tax in due course.

The government is expected to announce new tax changes this fall, but in the recent budget it froze the existing inheritance tax threshold until 2026.

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