The government should implement a fully integrated digital system for Inheritance Tax, ideally including the ability to complete and submit a probate application, The Office of Tax Simplification has recommended.

The first report of its Inheritance Tax review said pending implementation of a digital system, HMRC should make changes to the current forms to reduce and simplify the administration of estates, including introducing a very short form for the simplest estates and updating the conditions that must be met to be able to complete a short inheritance tax form.

HMRC is also being pushed to carry out a general review of its Inheritance Tax guidance with the aim of it being targeted to reduce concern for those who worry unnecessarily, clear, consistent and easy to navigate, linked or located with other relevant guidance, including probate. Expanded to include worked examples, a road map, timescales and a tax calculator and sufficient for complex estates to apply the law and practice correctly.

The OTS said HMRC should introduce a system issuing automated payment receipts and, if necessary, further refine the recently introduced 12 week response period, during which any enquiries into the information contained on the firm will be made. Furthermore it said HMRC should introduce a system issuing automated receipts for IHT100 forms and Inheritance Tax payments made alongside the firm, and consider introducing a review period during which an enquiry into the information contained on the IHT100 form will be initiated.

AJ Bell personal finance analyst Laura Suter said: “A simple online system would mean that up to 250,000 people each year could avoid the stressful process and instead find out instantly online whether they need to complete the longer form filling.

“This is clearly needed as the report shows that 13% of people spend more than 100 hours on the administrative rigmarole associated with inheritance tax, while 90% of people spent 10 hours or more.

“The report highlights that the wealthiest families are paying less tax than the middle class, with estates worth £10m or more paying an effective 10% tax rate, compared to a 20% tax for those with smaller estates of £2m to £3m. This is undoubtedly down to the fact that the wealthiest families get professional advice to set up trusts and make full use of the allowances, while those with smaller estates do not.”

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