Written evidence submitted by Catherine
Fromant
I am a solicitor in private practice and through
my membership of the Society of Trust and Estate Practitioners
I have received details of the above inquiry.
I specialise in advising elderly clients and through
my dealings with them I would like to mention the following in
relation to your inquiry.
1. I have had several probate cases where
following the death of the first spouse, the surviving spouse
sells a second property that was held by both spouses jointly
for many years eg a holiday home or an investment property. The
sale triggers a capital gains tax charge on the surviving spouse's
half share. Very often in these cases the surviving spouse has
never had to complete a tax return—their pension is taxed
under PAYE and their interest on savings has tax deducted at source.
Trying to deal with a one off CGT assessment in these cases is
very difficult and I am sure there must be many cases when taxpayers
either are not aware of their liability or because of the difficulties
in reporting the one off gain do not in fact inform the Revenue.
2. The benefits and tax allowances given
to the retired generation are a burden on public funds and disproportionate
to the tax liability of the working population.
Many retired people bought homes for around £5,000
in the 1960s and are able to sell the same property for between
£500,000 and £1,000,000 now, depending on the area.
There is no CGT on sale (principle private residence exemption)
and no CGT if it is sold after they die. There might be inheritance
tax on death, although for many if their estates are under £650,000
this does not apply for married couples with the transferable
spouse IHT allowance.
In the meantime they are entitled to winter fuel
allowance, free prescriptions, free travel, free TV licences etc.
For those retired people whose incomes are within the personal
age tax allowance this is understandable. However, many retired
people have very good incomes and do not need these benefits—they
do not have mortgages to pay or children to support, their food
bills are lower than in their younger days as they do not eat
as much, they do not travel as much as when they were younger
and many are not mobile enough to have weekends away or holidays
and so do not contribute much into the economy. As people live
longer, a sizeable proportion of that generation have high demands
on the NHS over many years, free at the point of delivery.
Many have benefitted from a generous tax and benefit
system for retired people, aimed at those on modest incomes but
benefitting many who have seen a massive transfer of wealth in
the values of their properties and there now seems to be a disproportionate
burden of tax on the working population, particularly young people,
many of whom cannot earn enough to pay for the basics of housing,
food and travel to work etc but meanwhile are paying a relatively
high percentage in income tax, national insurance, VAT and Council
Tax.
Because of the generous IHT allowances, money is
now passed to a proportion of fortunate beneficiaries in the next
generation in large amounts creating an unfair distribution of
wealth between the next generation which leads to other difficulties
in society. The generation dying often have not had the use of
their wealth because it has been tied up in their property, but
when they die this is released and passed on as untaxed money
to the next generation who have not had to work for it.
3. The IHT exemption given to charitable
bequests often means that well off people, particularly those
without children, leave their estates to charities and therefore
pay nothing back into the system for the benefits they have received
from the National Health Service, a well resourced society eg
the police, teachers, government departments etc. Perhaps instead
of a 100% IHT exemption for charities this could be a 50% exemption.
January 2011
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