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Blunkett calls for radical measures on IHT avoidance

Former Home Secretary David Blunkett says inheritance tax needs to be reshaped radically to ensure fairness and the Government must clamp down further on those seeking to avoid the tax through complex planning.

Speaking at a Resolution Foundation event at the House of Commons, Blunkett said Chancellor Gordon Brown’s Budget crackdown on trusts was a welcome move but advisers would find ways of getting round the new regime.

He said a rethink was needed to solve the IHT conundrum and move away from a situation where the wealthiest are able to avoid the tax while an increasing number of the population could be hit.

Blunkett said: “The problem is that better-off people are least likely to pay it. Gordon’s crackdown was very welcome but every time we do something like this, advisers come up with new ways to advise on avoidance.”

In a pamphlet released this week in association with the Resolution Foundation, Blunkett rejects calls for IHT to be scrapped as this would “reinforce disadvantage”.

The pamphlet says there is “a strong argument for reshaping inheritance tax and clamping down on the mechanisms used by the rich to avoid paying it”.

Former Cabinet minister Stephen Byers recently called for IHT to be scrapped, describing it as a “penalty on hard work, thrift and enterprise”. The Tories’ independent tax commission will next week call for the IHT burden on primary residences to be removed.

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