This week's opinion: 10 October 2019

The chancellor’s hint that he may abolish inheritance tax has created much interest – though given his speedy reversal on stamp duty land tax being paid by the vendor many people don’t believe that changes will be made. But let’s suppose they are.

In the first place they would be widely welcomed. This is not a political point but an acknowledgement that inheritance tax is more bitterly resented than any other tax. There is an anomaly here: few estates pay any inheritance tax but, as the Office of Tax Simplification saw in its survey response, many people who have paid tax all their lifetime are fundamentally opposed to the idea of HMRC having a further tax bite on their death. 

Would abolition simply mean drawing a line through the inheritance tax legislation? While that is possible I think there would have be some compensatory adjustments. Would, for example, capital gains tax be reintroduced on assets held at death, as it was when it was introduced? People might see that as jumping from the frying pan into the fire. But surely the tax-free uplift on death would go, replaced perhaps by the legatees taking over the deceased’s capital gains tax base cost. That would be logical but practically difficult. And what about lifetime gifts or trusts?

Chancellors should be encouraged to think radically about the tax system – we all know the problems that tinkering round the edges create. So let’s have a proper debate on the pros and cons of abolition and a realistic assessment of the consequences that would create. Perhaps Taxation readers might like to start the ball rolling – all contributions would be gratefully received.