HMRC are stepping up their inheritance tax investigations

HMRC are stepping up their inheritance tax investigations – Is your family doing everything they can to avoid a compliance check from HMRC?

HMRC are increasing their investigations on bereaved families, clawing back a record £326 million in inheritance tax in the last tax year. This figure was 28% higher than for the previous 12 months, and is the largest amount recovered in public available records. The sum reclaimed in the last tax year represented 5% of the total £6.1 billion that was paid in inheritance tax last year.

HMRC have also announced that they will receive £69 million from the Government over the next five years to recruit more staff for tackling tax compliance. A portion of this funding will go towards compliance checking large estates for inheritance tax. A dedicated team has even been set up to investigate individuals with an income above £200,000 or assets of over £2 million.

Inheritance tax is currently payable at a rate of 40%, paid on the value of any estate above £325,000. Homeowners can benefit from an additional £175,000 allowance if they pass on their main residence to a direct descendant, however this does not apply to all estates.

When an estate is subject to an inheritance tax liability, the personal representatives must complete a comprehensive form, from IHT400, in which they must provide accurate valuations of all assets, including properties. However, HMRC are querying more and more of these forms, and are clearly actively stepping up efforts to recover money from families who incorrectly declare the value of an estate and underpay their inheritance tax bill.

At Private Client Solicitors, we have noticed an increasing number of estates being compliance checked by HMRC. It is possible that this is a result of the rising value of assets such as property, which is justifying HMRC spending more time looking at individual cases.

Perhaps some families being investigated by HMRC may have knowingly undervalued assets, however the majority will likely have fallen foul of the complex inheritance tax rules and will have had difficulty valuing assets correctly. However, regardless of whether it is an honest mistake, these estates are prime targets for investigations, and investigations can drag on for several months, or even years, massively delaying the probate process at what is already an incredibly difficult time for a family.

It is therefore becoming increasingly important for families to ensure that they are correctly completing inheritance tax forms, and to engage in inheritance tax planning before they pass away. At Private Client Solicitors, our specialist team have years of experience in dealing with large estates. We can help your family take every step possible to minimise your inheritance tax liability during your lifetime, and if someone has passed away, we can assist to complete all inheritance tax forms correctly to minimise future queries and compliance checks by HMRC.

If you want help in checking to make sure that your estate planning is in order, or if you want to make sure you are dealing with a taxable estate correctly, please do not hesitate to get in touch.