OTS outlines alterations to IHT system
In a new report, the Office of Tax Simplification (OTS) has outlined a series of recommendations designed to ‘simplify the UK’s inheritance tax ( IHT ) system’.
In the report, the OTS urged the government to reduce the current seven-year gifting rule to five years. It also suggested abolishing the taper relief system and replacing the many forms of lifetime gifts with a ‘personal gift allowance’.
In addition, the OTS recommended reducing the complexity in the interaction between IHT and capital gains tax (CGT).
Commenting on the report, Bill Dodwell, Tax Director at the OTS, said: ‘The taxation of lifetime gifts is widely misunderstood and administratively burdensome.
‘We recommend replacing the multiplicity of lifetime gift exemptions with a single personal gift allowance, to be set at a sensible level, and incorporating an increased lower threshold for small gifts.
‘Where there is IHT to pay on lifetime gifts, the OTS recommends the government explores options for simplifying and clarifying the rules on who is liable to pay this tax, and how the £325,000 threshold is allocated between different recipients.’