Recommended reform of Inheritance tax to abolish Business Property Relief (BPR) & Agricultural Property Relief (APR)

The All-Party Parliamentary Group (APPG) for Inheritance Tax and Intergenerational Fairness has just produced a “Reform of Inheritance Tax” report with two major recommendations for the government to reform the current inheritance tax (IHT) regime.
The APPG suggests replacing the current IHT combination of a flat rate of 40% and array of reliefs, including the residential nil rate band, BPR and APR, with a flat rate gift tax payable on both lifetime and death transfers.
All lifetime gifts (except possibly spouse and charity) would be taxed when made at 10% if above the proposed annual allowance of £30,000. All other reliefs on lifetime gifts would be abolished.
There would be a flat rate tax on gifts on death of 10% up to £2 million, possibly 20% thereafter, with a death allowance of something similar to the nil rate band of £325,000, available only on death to individuals and not to trusts.
This would remove the complexities of lifetime gifts within 7 years of death, taper relief and the residential nil rate band. There would be no BPR or APR on the basis that the 10% (or 20% if the higher rate is adopted for estates over £2 million) payable on the transfers of family businesses and farms could be funded over 10 years by interest free instalments.
If these recommendations are adopted by government it will be a radical shift in taxing the transfer of wealth, particularly where business property and agricultural property are involved. Careful thought should be given as to how this might impact current succession plans. As this could vary widely dependent on circumstances, tailored advice will be crucial.