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Jeremy's Blog - 11th June 2020

Inheritance Tax is estimated to have raised £5.1 billion in 2019/20, less than half the yield from SDLT, making it one of the UK’s smaller taxes but touching very sensitively on individuals and families. Its tax take has been rising, largely on the back of rising house prices bringing more people into its net. Some countries have abolished it and George Osborne’s offer in 2007 of a £1 million Nil Rate Band between a couple was enough to deter Gordon Brown from holding an election.

In practice, and with the old view that the art of taxation is taking the most money for the least fuss, the policy seems to be to protect it as a tax by limiting the number of taxpayers it affects. George Osborne’s offer became the Residential Nil Rate Band Amount, now giving up to £1 million in relief where a couple pass a home they have lived in while owning it down the family. The policy calculations behind that appeared to include holding the number of affected taxpayers nearer the long run rate of 6 per cent than the double figures it was reaching.

Ever since the budget before the 1992 election increased APR and BPR to 100 per cent, there has been a recurrent professional itch, even an echo chamber, that APR, in particular, was under challenge – even though there has generally been very little evidence of any real risk. The value of APR with its particular shield beyond BPR for qualifying farmhouses and let land is perhaps £300-400 million, that is, 0.1 per cent of the probable cost of the Covid measures. Each time that it has been in question since being introduced in 1981, the law for APR has been widened, albeit perhaps becoming more closely administered.

Moreover, the Government recently indicated its approach to balancing the issues on these reliefs when Baroness Penn told the House of Lords on 20th May:

“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.”

She added that, while the Government was looking at the OTS reports “very carefully”, she was “not aware of any active consideration of the APPG’s proposals.” (Cols 1103-4)

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