Baroness Gardner of Parkes is a Conservative peer. A dentist, she was a Westminster City Councillor, and Lady Mayoress in 1987-88. She is also the only Australian woman to have been elevated to a peerage.
Yesterday she posed a sensible question about inheritance tax:
Lord Davies of Oldham: My Lords, the Government already have in place arrangements to meet this eventuality. While a house remains unsold, the inheritance tax due on it can be paid in instalments for up to 10 years. Where a house is sold within four years of the death for less than the value on which inheritance tax was paid, the personal representatives can in most cases make a claim for inheritance tax “loss on sale” relief.
Baroness Gardner of Parkes: My Lords, I thank the Minister for that reply, but that is a long-standing arrangement. I am asking for more help given the present circumstances. Does he agree that it is a vicious cycle that you cannot sell your asset until you have the grant of probate, but you cannot get the probate until the inheritance tax is paid, so you may well need to borrow in order to pay the inheritance tax and to get the probate? Then, when you are heavily in debt, you may be unable to sell but are paying heavy interest on a valuation which, according to all the top accountants, is being assessed at a price which reflects those at the top of the market and does not allow for the current drop in values. In some cases, people who lived in homes with their parents are being forced to sell those homes, or be badly in debt. What happens if it reaches the point where you have paid out so much in interest and borrowing that even if you get that money back after the four-year period, it does not cover all the interest you have had to pay to whoever lends you the money, if you can borrow it?
Lord Davies of Oldham: My Lords, the present arrangements are reasonable. The individuals concerned can delay the payment of inheritance tax. I appreciate the point that the noble Baroness makes about falling house values, but the Inland Revenue is not in the business of dispossessing people of the houses they have inherited in which they are still living. The Inland Revenue, of course, adjusts its values to the level at which houses are sold. It is for the personal representative to make the case that the price the house has achieved is below the valuation price on which inheritance tax was charged, and to claim a refund."
Tom Greeves writes:
I have an ongoing debate with friends who are much more economically literate than me. They say that if you want to cut a tax you have to show how you'd pay for it. That's fine, but I reject the view that you just work out what you need to spend before you work out how much to tax people. I think the two need to go hand in hand - we should always keep in mind how much it is fair to tax people and cut our cloth accordingly. We should also have a view as to how we tax them.
Inheritance tax is inherently egregious. It's one thing to tax someone if they inherit money. But a house isn't just a property or a source of wealth; it's a home. Forcing people to sell up at a potentially devastating time in their life (i.e. when they have lost a parent) is monstrous - no matter whether they are rich or poor. And tax has already been paid on a house several times over before the Death Taxman comes knocking.
True Conservatism isn't about trying to implement a pure meritocracy by destroying any and every perceived "unfair advantage". Justice shouldn't only apply to those who are perceived to be needy. It's time to abolish this ugly, unBritish tax altogether.
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