The sum collected by HM Revenue & Customs through probes into missing inheritance tax payments rose by almost one-fifth in the last tax year, as inflation dragged more people into the IHT net.

HMRC recovered £326mn following IHT investigations in 2021-22, up from £254mn in 2020-21 and £273mn the previous year, according to figures released this week under a Freedom of Information request.

“More inheritance tax is being recovered from HMRC investigations due to the rising value of assets and the potential sums at stake, which justify HMRC spending more time looking at individual cases,” said Sean McCann, chartered financial planner at insurance company NFU Mutual, which submitted the FOI.

The number of investigations also rose by one-fifth compared with the previous year to 4,258, but still fell short of the pre-pandemic average, which ran above 5,000 a year for over five years.

HMRC confirmed the number of inheritance tax inquiries fell during the first six months of the 2020-21 tax year when the UK first went into lockdown and the tax authority “reprioritised resource to support people and businesses”. 

John Stockdale, a technical officer at the Chartered Institute of Taxation, said that a rise in recent years in the number of people reporting the value of estates to HMRC personally — without using an adviser — may have led to more errors in application.

HMRC’s inheritance tax toolkit says that valuations are the “biggest single area of risk” accounting for a “large part” of the agency’s compliance checks, noting several issues around the valuing of properties which can be “easily overlooked”, such as the potential for the development of land.

Richard Jameson, partner at accounting firm Saffery Champness, said HMRC has been challenging asset and property values especially when there has been a sale within two years of death at a higher value than the submitted probate value.

“HMRC seems very reluctant to accept anything other than the ultimate sale price as probate value in these circumstances unless there is a demonstrable change in market conditions,” he said.

Common errors people may make when dealing with an estate can include a failure to declare bank accounts or unquoted shares or a misunderstanding of the reliefs and exemptions available.

“With relation to inheritance tax you have the nil rate band, the residence nil rate band, gifting allowance, potentially exempt transfers, business property relief, agricultural relief and so on,” explained Rachael Griffin, head of tax and trusts at wealth manager Quilter.

She added that with the legal process, accuracy is crucial. “Not having accurate records and keeping a track of activities carried out by an executor can quite easily result in an investigation being opened,” she said, adding that small mistakes such as spelling errors or the wrong use of names can cause some “serious problems”.

HMRC said its role is to collect the right amount of tax due under UK law. “Cases are opened where we identify a risk of tax not being paid . . . We appreciate dealing with inheritance tax can be difficult and we approach all cases with sensitivity.”

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