OTS calls for inheritance tax system to be digitised

January 2019

The Office for Tax Simplification (OTS) has urged the Government to implement a digital system for inheritance tax, following complaints the current form-filling system is too complex.

On average, there are around 570,000 deaths in the UK every year, although inheritance tax is due on less than 5% of estates.

Although the majority of estates are not liable to pay the tax, executors had to fill out inheritance tax returns for almost half of all deaths in 2015/16.

For more than a third (38%) of those, administering a loved one’s estate took more than 50 hours to complete, with some spending more than 100 hours.

Estate administration is the process of handling a person’s tax and legal affairs after they have died, while tax is deducted on the value of the estate before being distributed to beneficiaries.

Administrator’s duties include obtaining formal documents,calculating the value of their estate, working out and paying taxes, and obtaining a grant of probate.

For 31% of those polled by the OTS, the process took between 21 and 50 hours.

Understanding and completing the relevant forms (38%) and obtaining probate (24%) were among the most time-consuming processes for most respondents.

Meanwhile, only 11% of people said they had found the process simple and user-friendly, prompting calls for the inheritance tax system to be digitally overhauled.

To simplify the process, the OTS recommends creating a“fully integrated digital system for inheritance tax”, which would include the ability to complete and submit a probate application.

Angela Knight, chair at the OTS, said:

“The recommendations in this report will make it easier for the majority, and would mean that in future, many may not have to do the forms at all.

“Improving the administration of this tax is important a shaving to deal with the current process can seem overwhelming to people at a time when they are both preoccupied and distressed.”

Paul Morton, tax director at the OTS, added:

“Technology should be deployed to provide a digital solution to transform the experience of those dealing with the tax on a day-to-day basis.”

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