Simplify lifetime giving, urges the OTS

The taxation of lifetime gifts should be simplified and the seven-year period reduced to five recommends the Office of Tax Simplification (OTS) in its review of inheritance tax.

The report the second to be published on inheritance tax makes several recommendations to deliver a more coherent and understandable structure of the tax. Four main areas are grouped as packages in which some elements have an exchequer cost and others raise money. They are: the taxation of lifetime gifts; consideration of who pays tax when lifetime gifts are taxable; simpler exemptions for lifetime gifts; and a review of business exemptions to ensure they are focused on the policy goals and are consistent across different taxes.

Bill Dodwell OTS tax director said: ‘The taxation of lifetime gifts is widely misunderstood and administratively burdensome. We recommend replacing the multiplicity of lifetime gift exemptions with a single personal gift allowance...