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Government concludes no major reform for Inheritance Tax and Capital Gains Tax

Howells Solicitors

07 Dec, 2021

The government’s response to the Office of Tax Simplification’s (OTS) report was finally issued last week (30 November 2021). The OTS report included reviews on Inheritance Tax and Capital Gains Tax.

The response comes after a lengthy wait, with the second IHT report being published in July 2019 and the second CGT report published 18 months ago. With such a lengthy wait for response, many were expecting major reforms to be announced.

The Chancellor however, responded to the reports stating that whilst some of the recommendations will be implemented, they would not proceed with any major changes to Inheritance Tax (IHT) or Capital Gains Tax (CGT).

Inheritance Tax

The OTS report included several recommendations for reforms of the IHT including;

  • Reforming the Normal expenditure out of income exemption.
  • Changing the scope of reliefs such as Business Property Relief (BPR) and Agricultural Property Relief (APR)
  • Simplification of the rules for IHT on lifetime gifts

The government’s response was that there would be no overhaul of the IHT. Along with the refusal of a reform, it also means that the current inconsistencies in how IHT reliefs apply and interact with other taxes will not be addressed.

Capital Gains Tax

The government did accept some of the recommendations for CGT, which were mainly addressing administrative and technical issues.

One of which was the welcome news that CGT reliefs may be relaxed for separating or divorcing couples, with details to be published later.

The Chancellor also indicated that a further five recommendations will be kept under review.

For more information and detail on the recommendations being implemented, see https://www.gov.uk/government/publications/chancellor-responds-to-the-office-of-tax-simplification

For more information on inheritance tax planning see here.

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