Lords report calls for longer inheritance tax deadlines

The report, “Inheritance tax measures: unused pension funds and agricultural and business property reliefs”, welcomes the changes the government has made to the IHT measures since they were originally announced. However, it argues that these “changes are not by themselves sufficient to resolve many of our concerns that remain about what these reforms will mean in practice”, especially for personal representatives (PRs) who will be made responsible for IHT on pensions.

The report suggests that one of the most significant issues is the burden that will be placed on PRs by this measure, adding that it could mean that PRs become liable for IHT on assets they cannot “access or control”.

The report also expresses concern that the reforms risk “creating a generational divide”, as younger farmers and business owners can adapt over time, but older and more vulnerable owners have ‘limited’ options— due to anti-forestalling provisions which further restrict their ability to make use of existing lifetime gifting rules.

Moreover, the report expresses concern that the continued revision of IHT measures reflects “underlying problems with the government’s approach to tax policy making”, particularly in relation to its approach to consultation.

The report contains several recommendations to be considered ahead of these changes coming into force. Some of these reflect evidence given to the committee by CIOT and other professional bodies. CIOT and other bodies are quoted extensively in the final report.

These include:

• The six-month IHT payment deadline to be extended to 12 months for IHT on qualifying agricultural or business property assets, and on pension assets for a transitional period, so that PRs have a more realistic timeframe in which to meet their IHT liability while valuations are carried out and pension scheme administrators (PSAs) update their processes.
• The report urges the government to monitor the cumulative impact of APR and BPR reforms over a seven-year period, particularly in relation to how the reforms affect farmers and family business owners, and their succession planning.
• While expressing concern about the impact that the death of a key person can have on how a business is valued for IHT purposes, the report recommends that the government examine this impact and consider how the IHT rules should reflect this.
• The report encourages the government to take action to raise awareness of the details of the reforms, so that individuals understand what changes are coming and are able to prepare.
• On pension measures, the report emphasises the need for the timely finalisation of regulations for information-sharing between PSAs and PRs. It adds that the government needs to “prioritise issuing guidance for PRs, and look at other ways of providing practical support to help PRs understand and comply with their new obligations”.

You can read CIOT’s blog posts on the House of Lords Finance Bill Sub-Committee evidence sessions on these issues here and here, in which our representatives provided comments.