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Susan Kramer (Richmond Park) (LD): Today, the Liberal Democrats and the Conservatives are speaking out together on inheritance tax. That must be an event almost as momentous as London's success in winning the Olympic bid. As a former London mayoral candidate, I welcome that success on my party's behalf.

The new clauses address a matter that exercises us very much. The Bill breaks a principle, referred to in the past by my hon. Friend the Member for Bristol, West (Stephen Williams), that the Revenue should not go on fishing expeditions and seek by intrusive means
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information that does not apply directly to its ability to levy tax. The new clauses would remove the information requirement in relation to people who the Government do not believe should be subject to inheritance tax. The Bill would require them to fill out extensive forms at a time of great bereavement to prove that no tax should be paid.

The Revenue's fishing expedition will expose almost no evidence of tax avoidance. The Chancellor has said with great pride on many occasions that only about 6 per cent. of the estates left after people die in this country are liable to inheritance tax. The vast majority are not liable, and I am sure that all parties share common cause that that should remain the case. The intrusive search for detailed information required by the Bill is therefore unacceptable.

The concept of "excepted estates" applies to estates worth £275,000 or less, or to transfers to a spouse. That should be the appropriate benchmark, and we therefore associate ourselves with the new clauses.

Mr. Philip Dunne (Ludlow) (Con): I hope that the House will excuse the pun, but I have grave concerns about proposals to increase the powers of the nanny state. Her Majesty's Revenue and Customs has all-seeing powers over British taxpayers from the cradle to the grave, and now in the afterlife as well.

I support new clauses 1 and 8 as a way to restore sanity to families and professionals who have to deal with the immediate effects of the afterlife and sort out estates after people die. That is a very distressing time, and the Government's introduction last year of statutory instrument No. 2543—the Inheritance Tax (Delivery of Accounts) (Excepted Estates) Regulations 2004—made it immeasurably more distressing. As my hon. Friend the Member for Runnymede and Weybridge (Mr. Hammond) said, that order extended the requirement to file inheritance tax return form IT205—which he illustrated so eloquently—on all estates worth more than £5,000. Essentially, that requirement applies to every estate that requires probate.

That is a huge extension of bureaucratic form filling. Previously, one could file a nil return for inheritance tax unless one was within £30,000 of the inheritance tax threshold. Now the form will have to be filed in respect of all estates of over £5,000, and very detailed information on the value of assets will be sought. That information will include details of household and personal goods, and so will require the valuation of the furniture and jewellery, for instance, in an estate. All of that information has to be provided after a full inquiry has been made.

Mr. Philip Hammond: I hope that my hon. Friend will forgive me for correcting him, but there was no requirement under the previous regime to file a nil return. People were required simply to swear a declaration that no tax was due.

Mr. Dunne: I am grateful for that correction, and my hon. Friend is right to say that it was possible for solicitors to swear an affidavit, although they could choose to file a nil return.

The requirement would be reasonable if there was a good prospect that additional revenue would be raised, but my hon. Friend has noted already that most estates
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will be below the threshold and so will not qualify. As a result, the proposal has no revenue-raising potential.

What is the point of the proposed exhaustive form filling? How many people will be affected? My hon. Friend has given some statistics, but I have some other data that might help Labour Members understand the implications of what is being proposed. About 535,000 people die each year. I learned that statistic in a debate on fallen livestock, when the subject of human death was touched on. Only 35,000 estates pay inheritance tax, so it does not take great mathematical skill to work out that, if all estates were to be affected by probate, a very significant number of people will be affected.

Presumably, a not insignificant number of forms will land in the HMRC's offices, and will need to be checked. Some errors might be detected where there is a possibility that an estate goes over the threshold, but it is most likely that the forms will sit and gather dust after being collected. Therefore, many people in the bureaucracy will do very depressing work to no purpose.

Stephen Hammond (Wimbledon) (Con): My hon. Friend mentions bureaucracy, but is not the problem even worse than he sets out? In Committee, the Paymaster General talked several times about the need for anti-avoidance measures and the need to close the tax gap. Would not the money spent on this fishing exercise be better spent on other measures that would close the tax gap?

Mr. Dunne: My hon. Friend makes a good point. The HMRC work force is being reduced, so we should look carefully at the tasks that people there are asked to undertake. I hope that the Minister will consider that point.

There is a wider point in respect of the extension of the inheritance tax net. House price inflation means that more and more people in my constituency are falling into its clutches, with estate values reaching the duty threshold despite the increase introduced in the Budget earlier this year. The Land Registry reports that the average price of properties sold in the south Shropshire district in the first quarter of the year was £208,000. In the Bridgnorth district, the average was £214,600. In the same period, the average price of detached houses—that includes most of the village properties in my largely rural constituency—was £264,000 in south Shropshire and more than £307,000 in the Bridgnorth district council area. As a result, the average houseowner in my constituency is likely to be caught by the inheritance tax threshold.

Inheritance tax was originally intended to be a tax for the wealthy. It is increasingly hitting the average householder across the country. That is certainly the case in the Ludlow constituency. It is time that we looked at the tax as a whole, and stopped tinkering with extending it at the edges.

My final point has to do with the direction in which the Government are heading in respect of inheritance tax, which is in stark contrast to the direction that our major economic competitors are taking. I was in Washington DC last month and I discovered that
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legislation is passing through Congress and they are debating whether the American equivalent of inheritance tax—they call it death tax, rather starkly—should be scrapped or substantially reduced. If our major competitors are planning to scrap inheritance tax, we should think carefully about whether it is appropriate for us to extend the net. Instead, we should perhaps accept the increasingly competitive nature of the global economy in which we all live and consider scrapping inheritance tax.

Dawn Primarolo: It is important to put on the record a few points before responding to the debate. Unfortunately, some of the contributions that we have heard show that hon. Members have failed to appreciate how the system worked under the rules that were in place and how it will work under the rules before us. The hon. Member for Ludlow (Mr. Dunne) mentioned nil returns, and I shall come back to the issue of excepted estates. We are talking not about the entire inheritance tax system but about a special procedure for very small estates that will remove them from the normal procedure. For some 30,000 estates, it will be necessary to fill in only a very short form instead of the full form, over which—incidentally—the Conservative Government were happy to preside for years and years.

The approach taken in last year's Finance Bill, which was accepted by the House, was for the smaller estates to be subject to the excepted estates procedure. One does not have to be a genius to work out that it is simpler if only a short form needs to be filled out—only four pages, of which the first page and a bit is simple and straightforward stuff such as name and address, followed by yes/no questions and an estimate of the value of the estate, to ensure that it is within the limits of the excepted estates procedure—instead of the full inheritance tax procedure. It is difficult to see why the Opposition have a problem with that.

Nil returns are not needed, because such estates do not require probate. I shall return to that when I address the issue of the Court Service, which is also part of the new procedure and further deregulates the process. All that is being asked of people is to indicate whether they have properly calculated the size of the estate to ensure that it comes under the smaller estates procedure.

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