'Body of opinion' is against inheritance tax

Calls for an abolition to Inheritance Tax reflect a ‘growing body of opinion,’ a tax adviser has said.

Stephen Byers, the former Labour minister, called for death duties to be dropped last week on the grounds that the tax is a penalty on hard work and thrift.

Responding to the suggestion, which was met with a furious response from Brownites, tax advisers said Byers was reflecting the increasing concern with the duties.

Maurice Fitzpatrick at Grant Thornton said: ‘Byers is making a point that is reflecting a growing body of opinion. The question that must be asked is whether IHT is still doing what it was originally intended to do? The answer is no. It was intended for the very rich.’

An increasing number of middle class homes are caught up in the duty, payable on estates worth more than £285,000 at a rate of 40%.

When contacted by Accountancy Age this week, Byers refused to comment on whether he thought that avoidance schemes associated with IHT were ethically justified.

The tax has for some years been regarded as ‘avoidable’ given the network of rules allowing gifts and other schemes that can be used to sidestep it.

The Treasury will have been angry with Byers’ comments, not least because it has been struggling in recent years to plug the gaps.

In the most recent Budget, the government introduced tax charges on trusts, provoking an outcry that the moves would affect far more arrangements than intended.

John Barnett, a partner at Burges Salmon, said: ‘Trusts are being dealt with in a discriminatory manner. I would like to see trusts restored to parity since the government seems to view them as a tax avoidance mechanism, whereas the majority of trusts are created for perfectly valid family or commercial reasons.’

Byers’ call means representatives of both parties have now called for an abolition of the tax, which is opposed by the government. Stephen Timms, chief secretary to the Treasury, recently said the tax was ‘morally right’.

Tax campaigner, Richard Murphy, said Byers had ‘brought out all the usual wrong arguments on Inheritance Tax that the right love.’