The ideas of the Office of Tax Simplification (OTS) are meant to make a financial adviser’s life easier, but they are not particular happy with its proposals to change inheritance tax (IHT) legislation.
Estate planning solution provider Time Investments surveyed 55 UK financial advisers about the changes and only 19% believe they would have a positive impact.
Just under a half (45%) of those questioned didn’t know if it would have an impact.
Some 35% said the recommendations would not encourage the earlier transfer of wealth between generations.
The research also showed that over half (58%) of advisers’ clients have not yet asked for IHT advice – with the primary reason cited as complexity due to the poor understanding of IHT rules.
Understandable
Rachael Griffin, tax and financial planning expert at Quilter, said: “Advisers and client apathy to the OTS recommendations are understandable as it’s far from certain any of them will come to fruition.
“The OTS’ first paper on the befuddingly IHT system is coming up to a year old and the second report is at least four months old. The recommendations of the office are falling into the Brexit black hole and the risk is they become wasted effort.
“We are now in the midst of a governmental upheaval and with party manifestos starting to filter out we will see the variety of positions on inheritance tax.
“Really though this should be a cross-party initiative as rules regarding inheritance tax are, by their very nature, long term and require advanced planning.
“A constantly shifting framework makes such planning impossible.”
Less relevant
Neil Jones, tax and wealth specialist at Canada Life, told International Adviser: “It’s understandable that many advisers don’t believe the OTS Report would encourage the earlier transfer of wealth between generations.
“Certainly, the report could have gone further in terms of simplification.
“But there’s a broader point here. Generally, any simplification to the IHT rules will ultimately make it easier to transfer wealth.
“This is because one of the great difficulties when talking to clients is explaining the intricacies of the regulations in a way that non-professionals can take on board and act on.
“So, if some of these recommendations were adopted it would help, maybe not immediately but in the long term.
“We may find that events will overtake the OTS recommendations – in relatively short order, we’ll have new manifestos from the main political parties, some of whom have been talking or hinting at regulatory change around IHT.
“After the election comes, we may find the OTS report less relevant to the new financial world.”
The UK Labour Party unveiled its manifesto on 21 November 2019, which said it would reverse the IHT cuts brought in by former chancellor George Osborne, since it will “most likely benefit high income and wealthier households”.
