Policy paper

Inheritance Tax: interest changes to support the new digital service

Published 8 July 2015

Who is likely to be affected

Personal representatives and advisors or agents who administer the estate of a deceased person, trustees and other individuals who are liable to Inheritance Tax.

General description of the measure

The measure makes amendments to legislation relating to late payment interest to:

• extend the power to make regulations to allow the instalment interest provisions relating to certain financial institutions and companies to be updated
• clarify the period from when interest is charged

Policy Objective

These amendments will complement other changes which will be included in secondary legislation to support the digitisation of Inheritance Tax as part of the government’s digital strategy to improve the process for customers and the administration of the tax.

Background to the measure

At Autumn Statement 2013 the Chancellor announced that HM Revenue and Customs (HMRC) will provide an online service in 2015 to 2016 for people to submit Inheritance Tax returns and settle the tax affairs of those who have died. To support the introduction of the new online service, various legislative changes will be made in primary and secondary legislation to facilitate the new online processes and to align the treatment of interest and penalties for Inheritance Tax purposes with other taxes. The amendments made by this measure are a part of those changes and will ensure that the relevant interest provisions are updated and apply correctly when the new online service becomes available from 2015 to 2016. HMRC are continuing to develop the new online service and will be publishing a number of draft regulations in 2015.

This tax information and impact note (TIIN) updates and replaces the TIIN published on 10 December 2014.

Detailed proposal

Operative date

The amendments will come into force at an appointed day to be specified in regulations. This is expected to be at the same time as the new online service becomes available.

Current law

The current relevant legislation is in:

• sections 147(4), 234(3)(c) and 234(4) of Inheritance Tax Act 1984 (IHTA)
• paragraphs 7 to 9 and 14 of Schedule 53 to Finance Act (FA) 2009 (which are not yet in force but are expected to be commenced when the online service is introduced)

Proposed revisions

Legislation will be included in Summer Finance Bill 2015 to:

• extend the power to make regulations under section 107(4) and (5) FA 1986 in connection with section 234(3) and (4) IHTA to paragraph 7(7) and (8) of Schedule 53 FA 2009
• amend paragraph 9 of Schedule 53 FA 2009 to refer to the end of the month in which the testator died to align the provisions with those in section 233(1)(b) IHTA

Summary of impacts

Exchequer impact (£m)	2015 to 2016	2016 to 2017	2017 to 2018	2018 to 2019	2019 to 2020	2020 to 2021
	negligible	negligible	negligible	negligible	negligible	negligible
	This measure is expected to have a negligible impact on the Exchequer.
Economic impact	The measure is not expected to have any significant economic impacts.
Impact on individuals, households and families	The changes will only affect a small number of personal representatives dealing with the estate of a deceased person, trustees and other individuals who are liable to Inheritance Tax and who may be charged interest on unpaid tax. The measure is not expected to impact on family formation, stability or breakdown.
Equalities impacts	It is not anticipated that there will be any specific impacts identified for any equalities group.
Impact on business including civil society organisations	This measure is expected to have a negligible impact on businesses and civil society organisations. The changes will also affect solicitors, estate practitioners, accountants and other professional advisers and agents who deal with the small number of estates, trusts and lifetime transfers likely to be affected by this measure. The proposed changes are expected to have negligible one off costs on these businesses as they familiarise themselves with the changes and how they apply to their clients' tax affairs.
Operational impact (£m) (HMRC or other)	There will be no significant additional operational impacts from the legislative changes needed to support the new online processes.
Other impacts	Small and micro business assessment: this measure is expected to have negligible impact on small and micro businesses. Other impacts have been considered and none have been identified.

Monitoring and evaluation

This measure will be kept under review through communication with affected taxpayer groups.

Further advice

If you have any questions about this change, please contact Danka Wigley on Telephone: 03000 585277, email: danka.wigley@hmrc.gsi.gov.uk.