STEP: HMRC's surprise inheritance tax change met with disapproval - Spear's Magazine

STEP: HMRC’s surprise inheritance tax change met with disapproval

The surprise measure was introduced in the Finance Bill 2013 without prior consultation

HMRC has published guidance on s176 of the Finance Act 2013, which prevents executors deducting certain liabilities of an estate from its taxable value.

The surprise measure was introduced in the Finance Bill 2013 without prior consultation. The liabilities affected are, briefly, debts incurred by the deceased in order to purchase inheritance tax (IHT)-exempt assets; and debts that his executors do not pay off on his death.

According to HMRC, the measure was necessary to counter certain IHT-avoidance schemes, but professional bodies have sharply criticised it because it may cause serious problems for existing arrangements that were not set up to avoid tax. They are also disappointed that there was no consultation before the legislation appeared, though HMRC claims the period between publication of the Finance Bill and its enactment into law was an adequate substitute for a formal consultation.

In a document issued last week, HMRC stated that the inheritance tax manual will be updated to take account of some of these objections; in the meantime interim guidance has been issued.

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