Phil Hall, AAT head of public affairs and public policy said, ‘The simplest means of removing complexity around IHT would be to scrap it and rely solely on capital gains tax (CGT) as they have done in Australia since the 1970s. This would be far simpler and some might argue, a more meritocratic approach to taxation.

‘However, AAT accepts that the political appetite for such radical reform in the UK is unlikely to exist and instead suggests aligning definitions, scrapping exemptions and undertaking simple, sustained communications activity that helps to ensure the public knows most people are unlikely to be affected by this tax.’

In its submission to the Office for Tax Simplification (OTS) review, AAT argues that certain exemptions, including gifts on marriage, exemptions for gifts generally, gifts to political parties, and the small gifts exemption, are all reliefs that the public are largely unaware of, require a degree of planning and will usually only be taken advantage of if professional advice is given.

AAT says these should be scrapped to create a simplified IHT landscape that can be more easily understood by all. The association also recommends the removal of the charitable giving exemption introduced in 2012.

Hall said: ‘The charitable exemption is a substantial additional cost to the taxpayer but probably doesn’t equate to any more charitable giving than would have been the case anyway. It simply means that some estates are gaining substantial tax savings. It should go.’

AAT, unlike many other commentators, is also not in favour of increasing the £325,000 nil rate band (NRB), on the basis that with research suggesting a current average house price of £225,621 and average family savings of just over £3000 there is no need to do this.

Hall said: ‘As well as the statistical data about house prices and savings, new provisions allowing individuals and married couples to pass on their main home with a smaller tax liability are far more than any inflationary linked increase would achieve.

‘For the majority, the £325,000 threshold (£650,000 for a married couple) is more than sufficient, especially when property allowances are factored in. Unlike many commentators, AAT therefore recommends that the NRB be maintained rather than increased.’

AAT makes several other recommendations in its consultation response, including cutting the £1bn cost to the taxpayer of tax relief currently given through Business Property Relief (BPR) and Agricultural Property Relief (APR). AAT recommends this should be done by focusing the reliefs on businesses and farms instead of incentivising assets to be held primarily, and often purely, for tax reasons.

The Inheritance Tax Review: Call for evidence response from AAT is here.

Report by Pat Sweet