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Treasury to cut IHT red tape in Tax Day overhaul

The Treasury has published over 30 tax updates, consultations and documents, today on what has been dubbed Tax-Day – including plans to tighten tax rules on second properties and simplify inheritance tax red tape.

Today’s updates aim to cut inheritance tax red tape for over 200,000 estates every year by cutting down on the paperwork many families have to fill out.

Over 90% of non-taxpaying estates each year will no longer have to complete inheritance tax forms when probate or confirmation is required from 1 January 2022.

The government will also clamp down on the promoters of tax avoidance schemes and is now considering whether all tax advisers should be required to hold professional qualifications. While many tax advisers have professional qualifications at present the requirement is not compulsory at the moment.

While some changes were announced on Tax Day major changes to CGT and pensions tax, expected by some, were left off the table for now. 

Financial Secretary to the Treasury Jesse Norman said the measures, part of a 10 year plan to transform taxation, would increase “transparency, discipline and accessibility of tax policymaking.

He said: “These measures will help us to upgrade and digitise the UK tax system, tackle tax avoidance and fraud, among other things. By grouping them together, we want to give Members of Parliament, tax professionals and other stakeholders a better opportunity to scrutinise them.”

Today’s second property rules, if implemented, will mean that second home owners can only register for business rates instead of the higher council tax if their properties are genuine holiday lets.

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Under the current system, an owner who intends to let their holiday accommodation may also be able to claim business rates relief of up to 100%.

Under the changes announced today, owners of properties that are not genuine businesses will no longer be able to reduce their tax liability by declaring that a property is available for let but make little or no realistic effort to let it out.

The announcements come as part of a drive by the Government to simplify tax. As part of this drive, The Treasury has also called for evidence on its review of business rates.

The Government is committed to conduct a fundamental review of business rates and published the terms of reference for the review at the Spring Budget but opted to publish the documents at a later date, today, along with other tax plans.

The call for evidence seeks views on how the business rates system currently works, issues to be addressed, ideas for change and a number of alternative taxes.

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