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Stephen Hesford (Wirral, West) (Lab): I apologise to the House for not being in my place for the contribution by the hon. Member for Runnymede and Weybridge (Mr. Hammond), although I did hear the contribution by the hon. Member for Ludlow (Mr. Dunne). Based on what he said, does my right hon. Friend agree that the Opposition are really sniping at the fairness agenda? He gave the game away that the Tories' aim is to do away with inheritance tax.
To be fair to the hon. Member for Runnymede and Weybridge (Mr. Hammond), he did not say that he wanted to abolish inheritance tax, but it has been a feature of such debates in the past that Opposition Members have advocated that approach. The fairness that they are attacking is the fairness that says that whether an individual does their own return through the excepted estates procedure or a solicitor does a return on behalf of someone, the information required is the same and they are treated equally.
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The Opposition also argue that the Government should enable taxpayers to represent themselves and not force them to have recourse to professional advice if that is not necessary. I suspect that the role of solicitors, and what they will be required to do, is at the heart of the Opposition's objection, rather than the information that has to be provided by the taxpayer.
Mr. Brooks Newmark (Braintree) (Con): The thrust of the argument made by my hon. Friend the Member for Ludlow (Mr. Dunne) was the form-filling culturesomething that the Government pledged to change and reduce. Why will people be required to fill in forms for estates with a net worth of £5,000, which is a huge difference from the inheritance tax threshold of £275,000? Those forms will also require more and more bureaucrats to assess them.
Dawn Primarolo: I hope that when I explain how the process works now, the hon. Gentleman will realise that that question is based on a basic misunderstanding of what is required under the inheritance tax system. I am sure that he would accept that it is not unreasonable for any Government to require people to go through certain steps to ensure that the estate with which they are dealing should go through the excepted estates procedure, rather than the full inheritance tax procedure. That is all that is happening.
I find it odd that the Conservatives did not struggle with this point last year, because all these procedures were in last year's Finance Bill[Interruption.] I appreciate that the hon. Gentleman is a new Member, but his Front-Bench colleagues are not. There has been wide discussion of the issue and none of the suggestions made have caused any difficulties. Indeed, the connection with the Court Service is a further deregulatory measure that has helped enormously.
The hon. Lady suggested that the proposals were fishing trips, but that is not the case. It is careless talk to accuse the tax authorities of that when they are simply requiring people to answer questions to ascertain whether an estate comes under the excepted estates procedure. People had to fill in forms before, so it is not as if that is new. The issue is the length of the forms and the information that is collected. We are talking about small estates, which have always, as I said when I began my remarks, had to show the Revenue that they were entitled to use the excepted estates procedure. Applicants without a solicitor filled in a form that was much like the present form, so it is not true to suggest that there are additional burdens.
New clauses 1 and 8 would both amend the 2004 regulations, known as the excepted estates regulations, which are subject to that procedure. The hon. Member for Runnymede and Weybridge said that the new clauses offered two different solutions. They are interesting solutions. One of his new clauses completely abolishes the procedure and the other gives the Inland Revenue discretion to decide when the procedure would work. As the hon. Member for Richmond Park was so concerned about fishing trips, I should, on her behalf, be a bit worried about supporting new clauses that allowed the Inland Revenue, or Her Majesty's Revenue and Customs, to decide in such cases.
New clause 1 removes the current obligation on executors applying for probate to give details to the Court Service about the deceased person, their assets and values, when using the excepted estates procedure, whereas new clause 8 is apparently designed to give HMRC discretion over which details have to be given in such cases. I would have thought that either solution was rather undesirable. The aim in either case
Mr. Hammond: On a point of order, Mr. Speaker. I am sorry to have to raise this on a point of order, but the right hon. Lady will not give way to me. She has, I fear, inadvertently misled the House by saying that new clause 8 would provide that the Inland Revenue has the option of requiring a return to be made. In fact, it gives the taxpayer the option of making a return if he chooses to do so, and I should be grateful if she could confirm that that is the case.
Dawn Primarolo: Thank you, Mr. Speaker. What the hon. Member for Runnymede and Weybridge thinks his new clause may do and what I am advised by my officials that it will do, on which basis I advise the House, is always a matter for debate when amendments are proposed, but I shall repeat what I have said.
New clause 8 is apparently designed to give HMRC discretion over which details have to be given in those cases. The aim of both new clauses seems to be to reverse or modify the changes that the Government made last year, and to go back to the previous system whereby personal applicantsthose not represented by a solicitorhad to fill in forms about the estate, whereas legally represented estates did not have to do so.
The House may find it helpful if I provide some details about the administrative arrangements for such estates. The excepted estates procedure is a streamlined process for estates that are relatively small and relatively simple. If the estate qualifies, the executors are allowed to fill in a simple form and get probate immediately. Delivery of the form to the Court Service also satisfies their inheritance tax obligations, so they need have no direct contact with HMRCso how having no direct contact with HMRC empowers HMRC to go on a fishing trip
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beggars belief. Executors otherwise have to fill in a much more comprehensive form and send it to HMRC before they can get probate. The process thus provides links with probate, which ensures that it would be speedy for small estates, and relates exactly to the point that the hon. Gentleman made about the importance of speed in such cases.
The excepted estates procedure has always been restricted to estates that satisfy tests of size and complexity as set out in HMRC regulations. I think that we would all agree that eligibility should be limited in that way, as there is always a risk that large estates might slip through untaxed. We are getting the balance right by ensuring that there is speed for excepted estates, especially at probate, and that there is one point of delivery to the Court Service, with the ability to monitor the proper use of that process through HMRC.
The questions for this afternoon relate to how executors should establish that they qualify for the excepted estates procedure and what they have to tell HMRC about their workings. Before I move on to the detail of the changes that the Government made last year, it may help the House if I briefly describe the probate and IHT reporting system as it stood before the changes made in 2004.
Estates fell into three broad categories for reporting purposes. If the estate was worth more than £240,000, a full IHT return was requirednot the short form in use at present. If the estate was worth less than £240,000 and the executor was a personal applicant, they had to fill in a short form very much like the one in use now. If the estate was worth less than £240,000 but a solicitor was acting for the executor, the executor simply had to swear an oath that the estate was worth £X,000 to demonstrate that it qualified for the excepted estates procedure. Under the old rules many executors had to fill in a full IHT return even though the estate paid no tax. The Government changed the rules last year primarily to bring most of those casesabout 30,000into the excepted estates procedure, thereby reducing their compliance costs whether or not they were represented by solicitors. We moved them from the more complicated system to the excepted estates procedure. However, extending that procedure to bring in many more cases, many of them much bigger than those that were previously clearly eligible, increases the risk of non-compliance; so in striking the right balance, the Government took the opportunity to streamline the detailed procedure, improve co-ordination between HMRC and the Court Service, and update IHT protection against non-compliance.
As part of that process, the Government unified the two existing procedures for executors using the excepted estates procedure, so that they all now fill in the same short form whether or not they are advised by a solicitor. As I said, the form contains the minimum number of questions needed to show that the estate is entitled to use the excepted estates procedure and to allow HMRC to make a risk assessment.
The new clauses seem intended to reverse all those changes, so that some or all executors would be entitled to claim access to the excepted estates procedure without giving even basic information about the facts that would justify their using it. The Government's view
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is that that is misconceived. To qualify for the excepted estates procedure, executors have always been required to know the total value of the estate and key points about what it contains, and solicitors will always have to establish those basic facts.
The form that executors must now fill in only sets out systematically the questions that solicitors have been asking their clients already, before putting them through the excepted estates procedure. They are already collecting such information to satisfy themselves that their clients could use the excepted estates procedure. To be fair to solicitors, the overwhelmingly majority of them clearly took those obligations seriously. However, there have been indications that there were issues on different occasions, but none has been demonstrated with the new procedure.
To sum up, the uniformity that the Government built into the system in 2004 strikes the right balance. It is deregulatory. It unifies processes. It treats people equally. It ensures that the returns give the pertinent information only and are not excessive. It is fair to all taxpayers and to the Exchequer. It encourages executors to apply the same accuracy when completing the short form as they have done when filling out the full IHT return. On that basis, I suggest that hon. Members have no grounds to pursue the issue of fairness. I hope that, having heard the explanation of last year's changes and what they are achieving in the system, the hon. Gentleman will consider withdrawing the motion, but if he feels unable to do so, I will urge my hon. Friends to oppose the new clause.
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