WAY experts say that “cleaning up the rulebook could generate additional revenue that could contribute significantly to funding care”, as well as encourage better investment strategies by older investors.

In its feedback to the consultation, WAY recommended that the RNRB is removed completely, as it says the current rules are too complex and unfair, with a bias against people without children.

Whilst this could lead to reduced tax receipts, any loss of revenue could be more than countered for by aligning the AIM rules with the gifting rules for inheritance tax.

Currently, certain AIM investments qualify for potential inheritance tax exemption after two years, which may seemingly offer an opportunity to mitigate inheritance tax in comparison with making a gift.

But WAY says the rules can easily be misunderstood; firstly, only Business Property Relief (BPR)-eligible investments in AIM qualify for the exemption after two years, yet not all investors may be aware of this rule and clients may not be aware that they need to remain invested AIM for the rest of their life for the inheritance tax exemption to apply on their death.

John Humphreys, inheritance tax specialist at WAY Investment Services, said: “We welcome the review into IHT that is taking place.

“It is clear that the rules have, over time, become far too complicated.

“Anything that needs to be explained through 18 case studies is, by definition, not clear – and that is exactly how the RNRB is explained on the HMRC website.

“The complexity of the rules also means they are open to mis-interpretation.

“The review now gives a great opportunity to step back and shorten the rulebook.

“Scrapping the RNRB and adding the same incremental increases to the main NRB is a great place to start as it would instantly sweep away a whole layer of complexity and unfairness.”

He added: “The issues of NHS and social care funding for the elderly and inheritance tax are inextricably linked, so we have to consider them together in order to find solutions.

“We strongly believe that any changes need to focus on simplification.

“This means aligning rules and removing unnecessary rules, with AIM and the RNRB key targets.

“We sincerely hope that the outcome of the review are clear, simplified rules, that encourage investment in the best interest of both clients and companies, leading to better outcomes for all.”