Inheritance tax reporting requirements simplified

Following recommendations by the Office of Tax Simplification, the government will reduce administrative burdens for those dealing with 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 1 January 2022 over 90% of non-taxpaying estates each year will no longer have to complete inheritance tax forms for deaths when probate or confirmation is required.

In addition, the current temporary provision for those dealing with a trust or estate to provide an inheritance tax return without requiring physical signatures from all those involved will be made 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 owned indirect interests in UK residential property.

John Bunker, chair of CIOT’s Private Client (UK) Technical Committee, commented: ‘We welcome that, as part of the implementation of the OTS recommendations ‘to improve the customer journey’ for IHT many families in the aftermath of bereavement will be spared the additional stress of supplying unnecessary detail to HMRC.

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

‘The challenge for HMRC will be to design a process that meets that aim and is fit for purpose in only nine months.’

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

Norman said: ‘I have asked my officials to continue work on the remaining recommendations: for digitisation, improving processes for lifetime and trust charges, guidance, and working with court services. Some of these are longer term in nature, and will be taken forward as part of the wider Tax Administration 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 set to announce further tax changes this autumn but in the recent Budget froze the existing inheritance tax threshold until 2026.

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