HMRC targets inheritance tax returns

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Rising house prices and increases in other assets have seen HMRC launch more investigations to ensure individuals are paying the correct amount of inheritance tax (IHT), with the number of tax probes up by 5% this year.

There were 5,400 investigations into IHT returns in 2017/18, an increase from 5,100 on the previous year.

If an investigation finds that IHT has been underpaid, the estate may have to pay all of the tax owed plus a penalty, which could be up to 100% of the tax at stake in the estate. If the Executors deliberately undervalue assets, HMRC could also hold the Executors personally liable for any penalties.

The three areas that HMRC are most likely to look into when they investigate an IHT return include whether the figures submitted accurately reflect market value (particularly in respect of residential property); whether any claims for business or agricultural reliefs are valid; and whether any assets have been omitted.

The easiest and most common query by HMRC is the valuation of residential property in the IHT account. In some cases, HMRC might argue that additional value should be attributed to properties that have potential for refurbishment, or development of any attached land.

HMRC are increasingly challenging the value of estates as investigating IHT returns becomes considerably more lucrative for raking in extra tax.

Inheritance tax receipts reached £5.2bn in 2017-18, according to HMRC’s latest statistics. This is an increase of 8% (£388m) on 2016-17 and continues the upward trend since 2010-11.

Mark Speed, Probate Advisor and Personal Tax Manager at Ward Williams says:

“Analysis shows that around 1 in 4 of Estates liable to IHT have some form of compliance check carried out by HMRC. The biggest temptation by Executors seems to be under valuing residential property, usually because this is the biggest figure on the IHT account. The rise in investigations means more beneficiaries and estates, who may not necessarily be cash-rich, could be hit with hefty fines. Ward Williams can assist to ensure that IHT accounts are filed accurately and try to prevent HMRC coming back and querying the figures.”

*Mark Speed is also now a member of the Society of Will Writers.


About the author

Mark is a Personal Tax Manager and Probate Advisor at Ward Williams.

He is a Chartered Tax Advisor, advising on all areas of personal tax. He also offers specialist advice on Trusts, Estates, inheritance tax, Wills and Probate.

Mark keeps up to date with all UK personal tax issues so that he can deliver a valuable service to employees, high net worth individuals, property owners, entrepreneurs, Trustees, Executors, beneficiaries of Estates, and more.

Mark qualified as a Taxation Technician in 2010, achieving a Distinction in Personal Tax. He moved on to qualify as a Chartered Tax Advisor in 2012.

More recently, Mark passed the SWAT UK Certificate in Probate and Estate Administration Assessment in 2016. 

Mark is a full member of The Society of Will Writers.

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