To scrap or not to scrap inheritance tax, that may be the question!
When I asked random members of the public what they thought inheritance
tax was, the majority replied somewhere along the lines of "a tax on
However, most failed to know that IHT is
chargeable on lifetime transfers at a rate of 20%, provided it does not
fall within the narrow exemptions listed. So would anyone notice if we
Lord Lipsey, a Labour peer, wrote an article
in the Guardian against scrapping the so called "death tax". His
opinion was based on three arguments, namely 6% of estates will be
liable, it only generates 1% of revenue and that there are a fair few
Firstly, there is a problem regarding the statistics
usedtilised in this area. The statistics used do not give the whole
picture. Halifax conducted research into this field and came up with
the following facts. "The number of estates paying IHT rose by 72% over
the five years to 2003/04 to 30,451. The Government's own estimates
suggest a further 22% increase in the number of estates paying the tax
by the end of 2006/07 to 37,000." In addition, Halifax stated "one in
three (29%) detached property sales in the UK were above the 2006/07
IHT threshold of £285,000 last year. Five years ago only 13% of
detached properties were sold above the then IHT threshold of £234,000."
Lord Lipsey acknowledged that IHT only brings in 1% of revenue.
Therefore, if the revenue is minimal, why not scrap it? There can be no
justification of anti - avoidance as there is with Capital Gains. There
is either a tax or no tax on a particular transfer.
the argument of exemptions, Lord Lipsey failed to mention that the
exemptions are only in place to prevent double taxation. The
transferor, (i.e. person making the transfer), will more than likely
suffer capital gains tax. For example, gifts to relatives, will be
chargeable to capital gains tax at the full market value of the asset!
In some circumstances, one may even have to pay both CGT and IHT on the
same transaction. Therefore, in my opinion, exemptions that are used to
prevent double taxation, cannot be reason to justify the presence of
the tax itself.
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