Then he’d have heard of the lifetime savings hypothesis. Meaning that this steaming pile of tripe would be obviously wrong even to him:
I do, of course, welcome a crackdown on inheritance tax avoidance. It is necessary. Inheritance tax losses already, according to HMRC, cost the UK at least £400 million a year, or at least 12% of the inheritance tax yield.
Actually, I would suggest that this estimate is a work of fiction, but not because of avoidance but because of evasion. Let’s offer a simple example of why this might be the case.
Based on HMRC data for UK wealth, extrapolated from inheritance tax returns, the UK is worth about £3.5 trillion in all, or £4 trillion gross of mortgages, of which £2 trillion is housing. Now I know that was 2010 data, but in many parts of the country house prices have not changed much since then.
According to Land Registry data on housing the average UK house price is currently £172,011 and there are 19.3 million privately owned homes in the UK (4.3 million of them are let out). That makes £3.3 trillion for that one asset alone.
That difference is going to work through to the inheritance tax yield in the end (and yes, I know about the surviving spouse exemption – but we all die in the end – which is the basis on which the HMRC data works).
Something, somewhere is being seriously under-reported for inheritance tax and i suggest that it is evasion and not just avoidance in play here. As for the loss, if anything like £1.3 trillion of value is going missing from reported estates the under-declaration is going to be a lot more than £400 million a year, even given the time over which that value would have to be declared. It could run to billions a year.
Think through the assumption he’s making there. That all of the wealth of the nation passes through the inheritance tax system at some point or another. So, if wealth in the nation is greater than the amount of wealth passing through the inheritance tax system therefore there must be evasion of inheritance tax going on.
This an error which even an A Level in economics would help you to avoid. For we’ve this thing called the lifetime savings hypothesis. We save when we’re young in order to be able to consume when we’re old. And that means that the maximal wealth point is not the point of death: it’s the moment we retire, when we stop saving and start consuming that accumulated wealth. This is obvious if your pension pot is used to purchase an annuity: that wealth then is consumed between the annuity purchase and death. But this also happens to houses: it’s actually the law (or was until recently?) that you had to sell your house to pay for your old folk’s home stay. That’s consuming wealth before it reaches the inheritance tax system. And even Murph can’t start claiming that that’s tax avoidance or tax evasion now, can he?
Some goodly chunk of lifetime wealth is consumed before death: thus we cannot say that a gap between the amount of wealth in the country and the amount of wealth going through the inheritance tax system is symptomatic of tax evasion.