Reducing the Inheritance Tax Reporting Requirements

The Government is planning to reduce the administrative burden on those having to deal with estates and IHT following recommendations by the Office of Tax Simplification. The current requirements mean that personal representatives (even if the estates are not subject to IHT) must submit an IHT205 form when applying for a Grant. The government plans will mean that from the 1st January 2022, over 90% of non-taxpaying estates each year will no longer need to complete the IHT205 for deaths where a Grant or confirmation is required.

Potential Effects of Reducing the Requirements

Probate practitioners are understandably concerned about this change in policy. The loosening of this requirement could mean that personal representatives do not value an estate properly for IHT purposes or intentionally misrepresent the value to evade an IHT liability. Another issue is that those dealing with the estate may not be aware of relevant exemptions or allowances because of not completing the IHT205 and reading the guidance notes attached to it, which may cause further issues down the line.

In most cases where the first spouse/civil partner dies, the estate is likely to be exempt for IHT if all the estate is being passed to the survivor. However, to claim any transferable IHT allowances on the death of the survivor, certain paperwork will still be required. If the paperwork was not collated to complete the IHT205 at the time of first death, those papers and figures may be lost and become more difficult to recover at a later stage which could increase costs and potentially mean a loss of some allowances (if not dealt with in the time frames prescribed) resulting in an IHT liability which might not have otherwise arisen.   

There will still be a need for the value of an estate to be established as accurately as possible as the information will still appear on a Grant. However, it will be interesting to see what the new procedures are and how the figures submitted by the personal representatives will be verified.

Here to help

If you have any more questions regarding Inheritance Tax or would like advice on how to administer an estate, please get in touch with our Wills, Trusts and Probate team on 0161 941 4000 or, you can email the Wills, Trusts and Probate team.