Autumn Budget 2017: Behavioural evidence around Inheritance Tax and reliefs

Inheritance Tax (“IHT”) is a tax which is raising an increasing level of revenue year on year simply by reason of rising asset values.

In the first 7 months of this tax year the revenue raised from IHT rose by 14% to £3.2 billion.

Prior to the Budget it was widely speculated that there would be a tightening of the very generous IHT reliefs available which would have served to increase the rise in revenue even more and make it more difficult for wealth to be passed down the generations without a tax charge.

Rather than any specific changes being announced, a research document was published which had been commissioned by HMRC entitled “Behavioural evidence around Inheritance Tax and reliefs”. This document examines the motivations, behaviours and attitudes underlying the decision making process of individuals on IHT matters and the use of reliefs and exemptions in that process.

The research was carried out by interviewing and obtaining data from a small group of testators, beneficiaries and their agents.

The outcome of the research seems fairly benign, with fairly low evidence of any great understanding of IHT and the reliefs available and the motives for claiming reliefs. The greatest level of understanding seemed to be amongst farmers seeking to pass the family farm on to their successors without having to sell land to pay tax.

Although the research did attempt to examine the extent to which assets were being acquired specifically in order to benefit from reliefs such as agricultural property relief or business property relief, the evidence obtained in the research did not seem to indicate that there is strong activity in this area.

For the time being it would appear to be “business as usual” for IHT advisers and their clients. Whether HMRC take a different view on the extent to which BPR and APR are being used for IHT planning purposes, or whether there is the political will to make any changes in future, remains to be seen.