In a letter sent on 7 December to George Osborne, Andrew Tyrie said “the chancellor should think again about these proposals. They are a mess of complexity and uncertainty. And they almost certainly don’t need to be, in order to achieve the government’s objectives”.
One alternative suggestion Tyrie outlined would be to remove the so-called residence nil rate amount, and instead raise the relief threshold for any qualifying assets to £500,000 as the overall tax-free allowance for estates.
“A slightly smaller increase could achieve much of the policy objective while costing little more than the proposed approach and retaining the benefits of simplicity, fairness and clarity,” he said.
Tyrie added that the cost could brought down by reducing the £2m taper limit or increasing the taper rate for estates exceeding £2m.
In September, HM Revenue & Customs issued a detailed technical note which revealed that people do not need to own a property to take advantage of the proposed changes to the IHT rules.
This note, together with the original proposal, has attracted criticism from some in the industry for being too complicated and having unintended consequences.
The residence nil-rate amount is set to be introduced for deaths on or after 6 April 2017.
This will be phased in over a period of four years so that for deaths in 2017 to 2018 the maximum additional amount will be set at £100,000, rising to £125,000 for 2018 to 2019, £150,000 for 2019 to 2020 and to £175,000 for 2020 to 2021 – it will be indexed in line with the Consumer Price Index (CPI) from 2021 to 2022 onwards.
It is only available where the deceased’s residence, or a share in a residence, is inherited by direct descendants.
