---

Finance Bill

Thank you, Mr. Speaker. The challenge that the House now faces is how to make the Inheritance Tax (Delivery of Accounts) (Excepted Estates) Regulation 2004 seem remotely interesting. But we will do our best. The regulations that the new clauses seek to amend make provision for the delivery of accounts and other information for inheritance tax purposes. As I have said, the 2004 regulations were presented as deregulatory, and to some extent they are. Before their introduction, estates that were just below the inheritance tax value were required to deliver a full ““account”” to the Revenue, and were known as ““excepted estates””. Regulation 3 provides that a person is no longer required to submit an account under the terms of section 216 of the Inheritance Tax Act 1984 if the property is an excepted estate. This is in fact a perfectly sensible measure, reducing the compliance burden on some 30,000 estates valued between £240,000 and £275,000 every year. However, what was billed as a relieving measure is not so in practice. As so often with this Government, the deregulating instinct has been swamped by the regulating instinct of bureaucracy, and what regulation 3 gives, regulation 4, I am afraid, takes away—in spades. The 2004 regulations provide that all estates below the inheritance tax threshold, and which are valued at more than £5,000, are now classed as excepted estates. Regulation 6 provides that"““a person who by virtue of these regulations is not required to deliver to the Board an account under section 216 of the 1984 Act . . . must produce the information specified in paragraph (2) to the Board in such form as the Board may prescribe.””" In other words, the Government have scrapped the requirement to return an account for 30,000 excepted estates on form IHT200, but they have introduced a new requirement for some 300,000 estates per year. All those 300,000 estates are worth less than the IHT threshold and have no tax to pay, and all of them had no requirement whatsoever to make a return of any kind until the 2004 regulations were introduced. A requirement has now been introduced for those estates to make a return"““in such form as the Board may prescribe””." The prescribed form is in fact form IHT205. I have a copy of form IHT205 in front of me. It is a four-page document in the typical style of a tax return. It is laden with complicated and intrusive questions—so much so that there are 23 pages of accompanying guidance notes and 16 pages of annexes. The information required by the form includes details on the deceased’s occupation and that of surviving relatives; gifts given by the deceased over the past seven years; overseas assets; pensions; cash, including money in banks, building societies and national savings; value of household and personal goods; stocks and shares quoted on the stock exchange; stocks and shares not quoted on the stock exchange; insurance policies, including bonuses and mortgage-protection policies; money owed to the deceased; residences; partnerships and business interests; debts of the deceased; and funeral expenses. That is just what a grieving relative needs! We should remember that this requirement applies to estates below the inheritance tax threshold—to so-called excepted estates. It would be quite interesting to know what the Treasury understands by the term ““excepted””. In case anyone is tempted not to treat this intrusion with the seriousness it deserves, the document warns that there may be"““financial Penalties if the answers to the questions or figures given are wrong””." So before one completes the form, one must make ““full enquiries”” as to the value of the deceased’s household and personal goods. Estimates are explicitly unacceptable. Gathering this information could take a bereaved relative weeks or even months, and cause quite unnecessary stress at a time of personal grief. Given the form’s complexity and jargon-laden language, and given the difficulty that most lay people will have in distinguishing between the different classes of assets and liabilities that they are required to record in different parts of the form, many—if not most—relatives will seek the help of a solicitor in completing it. However, they will have no choice but to assemble the bulk of that information themselves, as a solicitor would be unable to aggregate it for them. Based on last year’s figures, an extra 246,872 estates now have to file a return. Based on an average solicitor’s hourly rate, and assuming approximately one hour’s-worth only of work and correspondence, this provision will cost the average estate between £150 and £250. That equates to between £37 million and £62 million in legal bills alone each year, and for what? This is not a return of inheritance tax due; it is a regime that applies exclusively to estates below the inheritance tax threshold. This is a massive and intrusive fishing expedition that involves trawling, collecting and storing information—in minute detail—on those who are supposed to be outside this particular tax net and free of the hassle of compliance. It turns on its head the previously accepted position that the details of an estate below the IHT threshold were not a matter for the Revenue. New clause 1 removes the regulations requiring reporting of excepted estates on form IHT205 altogether, thus relieving 300,000 bereaved families each year of this insensitive and unnecessary burden. New clause 8 seeks to achieve the same objective by a slightly different route. It leaves the provisions in regulations 6 to 10 in force, but makes compliance with them optional by omitting ““must”” from line 4 of regulation 6 and inserting ““may””. Giving taxpayers ““permission”” to make a return to the Revenue might seem a curious approach, but we are told that in some cases, professional executors, with a view to their own potential liability, might wish to have the comfort of having made a return on IHT205, thus enjoying the Revenue’s confirmation—if a notice has not been issued within a certain period under the regulations—that no tax is indeed payable. So new clause 8 leaves the provision force for the benefit of those professional executors who wish to use it, while removing the element of compulsion for the rest of us. We have no difficulty with a solution to this problem that allows those professionals who want to make use of the provisions to continue to do so. Our purpose today is to ensure that this burden is not imposed on ordinary bereaved families who are seeking to act as executors for the will of a deceased person. It is our contention that people who are dealing with modest estates—of as little as £7,000 to £10,000, and thus way below the inheritance tax threshold—should not be subjected to this additional burden at a time of bereavement or have to waste time and money completing a form whose only point is to feed the seemingly insatiable desire of the big brother state for information on every aspect of our lives. The measure is an example of a hugely insensitive invasion of privacy. It is an expensive and heavy-handed exercise that will burden some 300,000 estates every year and achieve nothing of practical value except the storing of huge amounts of personal information on everyone leaving an estate in excess of £5,000. All that is concealed behind what turns out to be a paltry relief for a mere 30,000 estates at the very top end of the exception band. I hope that the Paymaster General will pledge today that she will end this bureaucratic nonsense, either by accepting the new clauses or by making a definitive promise to introduce something that would have the same effect.