U.K. Treasury Adviser Finalizing Inheritance Tax Review Panel

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By Ben Stupples

The U.K. Treasury’s tax simplification adviser is finalizing a consultative panel to support its first review into the country’s complicated and divisive inheritance tax laws.

“Every review we do has a consultative committee,” Paul Morton, the Office of Tax Simplification’s tax director, told Bloomberg Tax. For the inheritance tax review, “we think that we’ve identified a number of people with particular experience, who are well known in their field and represent a range of taxpayers,” he said.

Paid at a 40 percent rate on the wealth of deceased individuals, the inheritance tax is one of the U.K.’s most controversial levies. A March 2015 poll from global market research company YouGov cited the tax as one the U.K. public considers most unfair.

Most recently, the tax came into focus after the August 2016 death of British landowner and billionaire Gerald Grosvenor. No inheritance tax was due on his $12.3 billion fortune as it is held in trusts, which are taxed at a special rate once a decade.

“This is an issue that creates enormously strong views,” Paul Johnson, director of the Institute for Fiscal Studies, said at a November 2017 inheritance tax debate in London, arranged by the think tank and the Chartered Institute of Taxation.

“The problem is that it’s essentially seen as a tax which if you’re healthy, wealthy and well-advised, it’s not too difficult to avoid,” he added. “Some people think it’s obvious you need to tax inheritance, while a lot of others think it’s obvious you shouldn’t.”

Complex Law and System

Inheritance tax only applies to estates worth more than 325,000 pounds ($449,764). The government collected in the latest financial year about 5 billion pounds from the tax, representing 0.25 percent of the U.K. economy, according to official data.

U.K. Chancellor of the Exchequer Philip Hammond commissioned the Office for Tax Simplification to carry out a review of inheritance tax laws in a Jan. 19 letter. The tax and the system within which it operates are particularly complex, Hammond wrote.

The OTS set out the scope of its latest review Feb. 15. The tax adviser will call for evidence on the U.K.’s inheritance tax laws and system “early in 2018,” it said.

The OTS’s consultative committees are typically made up of 10 to 12 members and provide guidance throughout the review process, Morton told Bloomberg Tax.

Morton, former tax director at FTSE 100 information and analytics business RELX Plc, also sought to downplay the outcome of the OTS’s inheritance tax review.

“Based on some of the reactions so far to the review, some people may have exaggerated expectations on what the OTS can achieve, and think there may be some dramatic reform,” he said.

“If there were sweeping reforms, that would not be the work of the OTS. This review is about simplification and incremental change,” he added.

To contact the reporter on this story: Ben Stupples in London at bstupples@bna.com

To contact the editor responsible for this story: Penny Sukhraj at psukhraj@bloombergtax.com

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