Revenue urged to follow US lead on IHT

Link: Inheritance tax contributions on the rise

The Inland Revenue should look to the US for lessons on how to recover unpaid inheritance tax, according to government spending watchdog, the National Audit Office.

In its report on inheritance tax, published last week, Sir John Bourn, comptroller and auditor general, said that the Revenue should make better use of existing statistical data on the make-up of estates.

It should also measure the ‘tax gap’ to establish the level of compliance of paying duty on estates.

This was an ‘area in which the Revenue could learn from its counterpart in the US’, stated the 49-page report. Despite this, the NAO generally backed the work the Revenue was doing in the burgeoning area of inheritance tax.

The NAO found that the Revenue processed ‘66% more cases than in 1999, and has taken on additional work, with a broadly similar level of staff’.

It also backed the Revenue for making inheritance tax forms easier to complete, but said that non-professionals – about 30% of those filling out inheritance tax forms – still required further assistance.

‘The Inland Revenue’s management of inheritance tax has improved over the last five years,’ said Sir John.

‘The burden of having to deal with the tax affairs of a relative after his or her death has been lightened, an important matter for those who are not professionals in these matters. And inheritance tax returns are dealt with more efficiently,’ he said.

The report also revealed the growing number of those estates liable to pay tax because of the boom in house price rises. In 2003/04, the tax was paid by 30,000 estates, giving the Revenue total receipts of £2.5bn. The number of estates liable to meet the tax threshold – the first £263,000 of someone’s estate is not taxed – has increased by more than 10,000 in the past five years.

‘My report highlights a number of areas where the Revenue can build on those improvements, to help ensure compliance and improve service to inheritance tax payers,’ said Sir John.

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