Writing for Taxation magazine’s 90th birthday issue, BKL tax adviser Terry Jordan reveals the improvement to the tax system which he would like to be celebrating in ten years’ time.
At the risk of biting the hand that feeds me, I should like to celebrate the abolition of inheritance tax.
Taxes on death in their modern form arrived with estate duty in 1894. Keen-eyed viewers of Ripper Street will have spotted a poster in one episode announcing its introduction.
Labour replaced estate duty with capital transfer tax, originally with lifetime cumulation of gifts to be aggregated with the value of the estate on death. The principles of the tax were changed by Conservative governments with ten-year cumulation being introduced in 1981.
Inheritance tax was introduced with effect from 18 March 1986 and with it came the old estate duty concept of gifts with reservation of benefit. Conservative governments have hinted at abolition in the past: in 1990 John Major referred to ‘wealth cascading down the generations’. Labour governments, by contrast, have tightened the rules where they have perceived susceptible to abuse, in particular the significant changes to the taxation of trusts effective from 22 March 2006.
The yield from the tax, although increasing, is a relatively small slice of the fiscal pie. The amount of intellectual capital deployed both in HMRC and in the professions has, it seems to me, become completely disproportionate.
So, farewell IHT
Send not to know for whom the bell tolls
It tolls for thee.