Charity calls for change to 'unfair' IHT rule

Campaigning tax advisers are calling on the Government to correct a tax quirk that is adversely affecting elderly widows and widowers.

The Low Incomes Tax Reform Group (LITRG) – the charitable arm of the Chartered Institute of Taxation (CIOT) – has highlighted the fact that a small number of older people, those whose spouse died before March 1972, are being excluded from the transferable nil-rate band inheritance tax relief, which was introduced in 2007 to enable the IHT allowance of the first person in a couple to die to transfer to the surviving partner.

The LITRG said it has come across a small number of individuals affected by this oversight in the latest rules, mainly long-widowed women who feel unfairly treated. 

The organisation’s John Whiting, who is tax policy director of the CIOT, explained, ‘Essentially, before March 1972, when a modest spouse-exemption was brought in, someone who died and left their property entirely to their surviving spouse was always chargeable to estate duty [the forerunner of IHT].

‘They used up all of what we today call the nil-rate band, which means that, under the current rules, the surviving spouse has no additional nil-rate band available on their death.’

Mr Whiting added, ‘The change needed here is simple, would cost a very small amount and would remove tarnish from an enlightened and sensible tax measure. Why can’t that change be made?’

Categories: News , CIOT , LITRG , Inheritance Tax