OTS Inheritance Tax Review – first report published

The Office of Tax Simplification (OTS) sought views from those with personal experience of Inheritance Tax to inform its simplification review. There was one question that related specifically to charitable giving.

Charitable giving

If a person gives to charity in their will or during their lifetime, this is exempt from IHT. If 10% or more of a person’s net estate is given to charity in their will, IHT may be payable on the whole estate at a lower rate of 36%. There are also complex rules about the incidence of IHT between exempt and non-exempt parts of the residue on death.

18) How well do you think the charitable exemption and the lower rate of tax on death is understood by advisers or the public? Please tell us about any areas of complexity in the application of this rate, or the charitable exemption, along with any suggested improvements.

CTG submitted a short response to the consultation, highlighting the value of the relief as an option for donors and calling for improved communications about the relief to help increase take-up.

The OTS has now published a first report into its review into IHT which focuses mainly on administrative issues. There is reference to the charity exemption, including practical concerns about its operation. The OTS has confirmed that it will return to this and other complex areas in a second report to be published in Spring 2019, with the aim of investigating the ongoing debate about how these more complex aspects of the tax could be simplified.