Legal News | 11.06.20
An Inspector Calls (or might do)
Aggressive Inheritance Tax Investigations on the horizon following a temporary pause by HMRC
Whilst HMRC might have temporarily suspended inheritance tax (IHT) investigations in the wake of the coronavirus outbreak, the likelihood is they will become more aggressive when investigations start up again to help balance the country’s books.
HMRC are most likely to investigate cases where IHT reliefs are being claimed on someone’s death, including the following:
Agricultural Property Relief
Assets which attract Agricultural Property Relief (APR) can be passed free, or partially free, of IHT on a person’s death. HMRC is known to view this relief increasingly as a ‘loophole’ which can be exploited. It would therefore be wise for those who have assets which could attract APR to ensure that these assets meet the necessary requirements as it is likely HMRC will be paying particular attention to this relief in the future.
The transfer of pensions are exempt from IHT where a person dies more than two years after making the transfer. If the transfer is made less than two years before the death of the transferor, it will be considered as an asset of the estate and therefore subject to IHT where the estate is valuable enough to be subject to IHT. This is also something that HMRC will be keeping a sharp eye on in the future. As solicitors, we cannot give investment advice; however we can work with your investment advisor to assist the IHT planning connected to your investments.
The true value of the estate
HMRC will also be scrutinising estates which are valued only slightly below the nil-rate band and so accurate and credible valuations of a deceased person’s assets will be more important than ever.
Inheritance tax rules are complex and it can be easy to make mistakes. HMRC can impose draconian penalties on those they believe to have underpaid IHT, issuing sanctions of up to 100% of the tax that is owed. It is, therefore, always best to ensure that information submitted to HMRC for IHT calculations is as accurate as possible. In addition, involving professionals, such as Wansbroughs, at an early stage to assist with communicating with HMRC will be crucial.