The review, Hammond said, should include a focus on the technical and administrative issues within IHT.
“Such as the process of submitting returns and paying any tax due, as well as practical issues around routine estate planning and disclosure.”
Additionally, he said the review could look at how current gift rules interact with the wider IHT system, and whether the current framework causes any distortions to taxpayers’ decisions surrounding transfers, investments and other relevant transactions.
Nil rate band
Anthony Nixon, partner and inheritance tax expert at law firm Irwin Mitchell, said the review of IHT is “well overdue”.
He said it needs to address the “ridiculously complex” new nil rate band.
“Put plainly, [the nil rate band] discriminates against those who do not own their own home, those who do not have children, and those who are not married.
“The current £325,000 ($458,186, €369,770) allowance, which has been fixed since 2010, could then be raised for everyone,” Nixon said.
House prices have soared in recent years but the nil rate band of £325,000 has remained unchanged since 2009. This has resulted in more families being caught by the tax.
The government said it will implement a new nil rate band for couples and civil partners of £1m by 2020. Critics warn that this adds another level of complexity to an already complex system.
Rachael Griffin, tax expert at Old Mutual Wealth, shares a similar sentiment to Nixon and said the OTS has a “golden opportunity to simplify this complex area of taxation”.
“Our research revealed that 70% of people have no idea how the nil rate band works. An easier method to achieve the same goal would be to simply raise the standard nil rate band amount to £1m,” she said.
Another area Griffin says needs to be reviewed is the annual gifting allowance, which has remained at £3,000 since 1981. She said if this had just increased with inflation it would now be worth £10,000.
“Increasing longevity means that men aged 65 will live to 87 […] so their children will often have to wait till their 50s and 60s before they receive the money which is not when they need help the most,” she said.