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OTS makes recommendations for reform of IHT

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The Office of Tax Simplification’s second report on its review of IHT looks in detail at the more complex issues raised in its 2018 call for evidence.

The main recommendations include proposals to:

  • combine lifetime gift exemptions into a single personal gift allowance;
  • reform or replace the ‘normal expenditure out of income’ exemption;
  • reduce the period for potentially exempt transfers from seven to five years;
  • abolish taper relief for gifts made more than three years before death, as well as the ‘14-year rule’ applying to certain gifts made into trusts;
  • reform the rules on how the nil-rate band is allocated to lifetime gifts;
  • remove the CGT uplift on death;
  • align the rules on trading activity for CGT and business property relief (BPR) purposes, including limited liability partnerships and furnished holiday lets;
  • review the eligibility of farmhouses for agricultural property relief (APR) where farmers need to leave for medical treatment or to go into care, and clarify HMRC’s guidance on when formal valuations are required;
  • make death benefit payments from term life insurance free of IHT on death without the need for them to be written in trust; and
  • review the continued relevance of the pre-owned assets rules and their interaction with other IHT anti-avoidance legislation.

Should the government decide to proceed with these changes, the OTS would like to see them implemented in relation to deaths on or after a certain date, without introducing further complexity through a transitional period.

See IHT review second report: simplifying the design of inheritance tax, at

Issue: 1451
Categories: News