Asked by
To ask Her Majesty’s Government what assessment they have made of
(1) the amount of inheritance tax paid, and (2) the measures
being taken to avoid paying any such tax; and what plans they
have, if any, to ensure that inheritance tax is paid promptly.
The Question was considered in a Virtual Proceeding via video
call.
(Con)
My Lords, from our latest estimates, inheritance tax receipts for
2019-20 totalled £5.1 billion. HMRC has a duty to collect the
correct taxes as laid down by Parliament, and it carries out
compliance checks into inheritance tax returns to ensure that
customers pay the right amount. Inheritance tax is payable within
six months of the date of death and must be paid before probate
is granted and the assets in the deceased’s estate are
distributed.
(LD)
My Lords, I thank the Minister for her reply. She refers to the
UK’s total annual £5 billion inheritance tax, which is paid only
by the wealthy and the middle-class, who have less ability and
wealth to avoid death duties by imaginative and creative tax
plans. Virtually no IHT is paid by the very wealthy in the UK.
Tax planning is sensible, tax evasion is illegal, but creative
tax avoidance is also unacceptable. The Office of Tax
Simplification was asked to review the tax. Can the Minister tell
us about its recommendations and the Government’s response to
them, in particular on how to curb the creative tax industry and
those who use it?
My Lords, the Government thank the Office of Tax Simplification
for the work it has done; they are looking at the results of its
two reports very carefully. I reassure the noble Lord that since
2011, inheritance tax and trusts have been brought into the
disclosure of tax avoidance schemes—DOTAS—regime, which means
that any new and innovative inheritance tax avoidance scheme
involving transfers into trust must be disclosed to HMRC, and
gives the Government powers to take any enforcement actions
necessary.
(Lab)
My Lords, as the noble Lord, Lord Palmer, said, the very
wealthiest are just not paying their share of inheritance tax. In
2016, estates worth £2 million to £3 million paid only 20% rather
than the 40% required. Estates worth over £10 million paid on
average just 10%. With Exchequer revenue to be at a premium in
the years ahead, will the Government urgently examine the closure
of the myriad loopholes available to the very wealthiest; for
example, through the extensive use of transfers to trust?
My Lords, I point out that in 2018-19, inheritance tax receipts
were at a record high, and 70% of inheritance tax comes from
estates valued at £1 million or more. I believe that the noble
Lord is referring to certain exemptions that come under
agricultural and business property. While we recognise that there
are some concerns, the policy intention behind those exemptions
is to allow family farms and businesses to be passed on without
having to be broken up to pay inheritance tax. We think that that
is an important aim.
(LD)
The APPG on Inheritance and Intergenerational Fairness has
recommended replacing inheritance tax with a 10% flat rate gift
tax payable on both lifetime and death transfers. Would that not
be a good way of getting rid of this hated tax with its complex
exemptions and avoidance, and potentially bring forward economic
demand benefits?
My Lords, the Government keep the tax system under review and any
changes made are taken in consideration of economic
competitiveness, levelling up growth across the UK and their
impact on individuals and businesses. However, I am not aware of
any active consideration of the APPG’s proposals.
(Con)
My Lords, IHT is an iniquitous tax and the noble Lords, Lord
Palmer and Lord Wood, have a point, although full disclosure of
any schemes has to be made in box K of IHT 100. Will my noble
friend the Minister consider taking a look at the two major
loopholes? The first is the definition of “business” within BPR
and the second is the exemption for non-doms of non-UK assets?
My Lords, under the definition of businesses, certain criteria
must be met in order to qualify for the exemption. It is
restricted to trading businesses which provide goods and services
and is not available to those dealing either wholly or mainly
with securities, stocks, shares or land.
(Con)
Does my noble friend agree that we are well overdue for a
transformation of our tax system across the piece? We need a
public debate led by the Government on this. Only after that
could we truly say who should pay and how they should pay it.
Will she take this suggestion back to the department and then
report to the House how such a public discourse could be
undertaken?
Changes have been made to inheritance tax in recent years;
notably, that from 2017, implementation of the residential
non-rateable band, which allows families who have built up an
asset, usually the family home, to pass it on to their direct
descendants. As I said in a previous answer, we keep the tax
system under review; for example, we have considered and continue
to consider carefully reports from the Office of Tax
Simplification.
(Lab)
My Lords, as my noble friend Lord Wood made clear, wealth
inequality in the UK is even greater than income inequality. As
the Government consider how to pay for the current coronavirus
crisis, will the Minister commit to the principle of fairer
taxation of both income and wealth to ensure that those with the
broadest shoulders genuinely bear the biggest burden?
The Government are committed to a fair taxation system. We
recognise that the current pandemic will have an impact on public
borrowing and we will need to look at the sustainability of our
public finances in the future. Our immediate focus is on
providing financial support now for those who have been hit by
the pandemic and on supporting jobs and livelihoods while we are
in the period of social distancing and other coronavirus-related
restrictions.
(LD)
My Lords, I fully support IHT being paid when it should, but I
also support the campaign against excessive and burdensome
bereavement bureaucracy being run by the charity Cruse
Bereavement Care and the Times. In that context, can the Minister
explain and justify why HMRC obliges the completion of onerous
IHT forms in certain circumstances, even if the sole beneficiary
is a spouse who is exempt from paying the tax? If she cannot
answer me now, will she commit to reviewing this issue?
I pay tribute to the noble Baroness for her campaigning in this
area. I reassure her that the Government have recently
implemented an online service for inheritance tax where excepted
estates can provide assured accounts to HMRC through a simple
online portal. We will continue to consider ways of making the
payment of tax more simple; for example, during the pandemic we
have recognised that the provision of wet signatures may not be
possible so we have introduced the acceptance of e-signatures in
their place.
(Lab)
My Lords, does not the current crisis and its impact on the wider
tax take offer us the ideal opportunity to reform inheritance tax
by abolishing it and treating inheritance as income under the
Income Tax Acts, with an added tax-free allowance or threshold?
This would increase the tax take, substantially widen the
recipient base, make for a far more equitable distribution of
wealth, and foster entrepreneurship on potentially a huge scale.
Why not seize this opportunity while we have it?
My Lords, as I have said, we will look at the public finances and
how we can put them on to a sustainable footing after this
crisis, but during this crisis our focus is on getting support to
households now. We have made a number of changes to the
inheritance tax system recently, including the Office of Tax
Simplification report, and we will continue to keep all these
aspects under review.
(Con)
My Lords, Australia abolished federal inheritance tax in 1979.
Following that, by 1984 all estate duties, state and federal,
were removed nationally. Have the Government assessed the pros
and cons of systems used by other countries in this inheritance
tax issue and, if not, will they commit to doing so? These
answers may cover many of the points raised by other noble Lords
in this Question.
The Government often look at systems in other countries to see
what can be learned from them. In the UK, the Government think
that inheritance tax makes an important contribution to the
Exchequer, while balancing the importance of allowing those who
have worked hard and built up an asset that they want to pass on
the ability to do so.
