HL Deb 28 January 1992 vol 534 cc1164-5

2.45 p.m.

Lord Boyd-Carpenter

asked Her Majesty's Government:

What would be the cost to public funds of a decision to free from liability to inheritance tax an individual's principal home.

The Minister of State, Department of Transport (Lord Brabazon of Tara)

My Lords, the information is not available in precisely the form requested by my noble friend. To exempt all residential property from inheritance tax on death is estimated to cost around £500 million in a full year.

Lord Boyd-Carpenter

My Lords, perhaps I may indicate qualified gratitude to my noble friend for giving part of the information for which I asked. Is it not a fact—and has my noble friend allowed for it —that if when someone succeeds to a family home he is freed from the need to pay inheritance tax that will reduce the demand on public funds where questions of preserving a historic home arise, an area where considerable expenditure is incurred already? Secondly, is it not in accordance with government policy that people should be given full opportunity to continue to live in and own their own homes?

Lord Brabazon of Tara

My Lords, it is certainly the case that the Government wish to encourage people to continue to live in their own homes. There is exemption for transfers between spouses on death which saves either widows or widowers from needing to sell the family home to pay inheritance tax. So far as concerns historic houses or houses of architectural interest, exemptions from inheritance tax are available in those cases.

Lord Donoughue

My Lords, while I sympathise with the need for some reform to secure a fairer spread of the burden of inheritance tax, does the Minister not agree that this specific proposal would be regressive in that, first, it would give the biggest benefits to those with the biggest houses and, secondly, it would encourage avoidance—not evasion—by encouraging people of advanced years to put their assets into unnecessarily large houses, thereby distorting both the housing market and the investment market?

Lord Brabazon of Tara

My Lords, the noble Lord's second point is indeed true. It would probably encourage people to concentrate their wealth in more expensive homes than they really needed. On the noble Lord's first point of providing a fairer spread of inheritance tax, of the 640,000 people who die each year in the United Kingdom only about 4 per cent. of estates pay inheritance tax. It would be better for that figure to go down rather than up.

Lord Tordoff

My Lords, can the noble Lord explain how his noble friend's suggestion would help people to live in their own homes when they are, by definition, dead?

Lord Brabazon of Tara

My Lords, I cannot answer for my noble friend. The point I took from his question was that the family should continue to live in the home.

Lord Mackay of Ardbrecknish

My Lords, can my noble friend remind the House of the current threshold for paying this tax? How has it moved since 1979? In addition, I wonder whether it is possible for him to remind us about the movement in house prices over the same period.

Lord Brabazon of Tara

Yes, my Lords. Since 1979 the threshold for inheritance tax, which is now £140,000, has risen by 460 per cent. The price of property has risen by 293 per cent. So it has had a favourable effect on the matter.

Lord Morris

My Lords, what is the cost of assessment and collection of inheritance tax on an individual's principal home?

Lord Brabazon of Tara

My Lords, I am not sure that I understood my noble friend's question correctly. The figure I gave in my original Answer is that the yield from inheritance tax on residential property is around £500 million. The total yield from inheritance tax for the current financial year is around £1.3 billion.

Lord Morris

My Lords, I shall put my question in another way. Is that net yield or gross yield after deducting the cost of collection and assessment?

Lord Brabazon of Tara

My Lords, I think that it would probably be gross yield.

Lord Boyd-Carpenter

My Lords, will my noble friend expand upon his statement that exemption is granted in the case of historic houses?

Lord Brabazon of Tara

My Lords, relief may be claimed for buildings of outstanding historical or architectural interest. Conditional exemption is available because of the heritage quality of the building, whether or not it happens to be the owner's main home. In return for the exemption, the owner must give undertakings to maintain the property, to preserve its character and to give the public access to it.