Government inheritance tax review demonstrates need for a radical shake up

A review of inheritance tax released by the government today illustrates why the tax is ripe for reform. The Office of Tax Simplification highlighted how a number of features of inheritance tax, including some that benefit the very wealthy, are hard to justify.  

Responding to the review, Robert Palmer, Executive Director of Tax Justice UK said: "Inheritance tax is broken. The public dislike it and the very wealthy can get away with not paying it. This review has pointed to a number of features of the tax which are hard to justify, 

for example that no tax is due on shares on the AIM stock exchange. However, we need a more ambitious reform agenda to make inheritance tax work properly.” 

Tax Justice UK’s recent report into inheritance tax reliefs found that a small number of the wealthiest families in the country are sharing up to £666 million a year in inheritance tax breaks on agricultural and business property. The Office of Tax Simplification pointed out that these reliefs will cost £5.85 billion over the next five years but due to its limited scope, the review stopped short of suggesting major reform. 
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Our report on inheritance tax 'In Stark Relief' recommends:

• A review of the fairness and effectiveness of inheritance tax reliefs with consideration given to whether they should continue at all;
• A cap on the amount of relief available to estates that have a value over £1m;
• An end to tax relief on shares invested in companies in which a family has no substantial or controlling interest, for example AIM shares; and
• An end to the ‘double whammy’ of income and inheritance tax giveaways on Alternative Investment Market listed ISA share products.