The sum collected by HM Revenue & Customs by probes into lacking inheritance tax funds rose by nearly one-fifth within the final tax 12 months, as inflation dragged extra folks into the IHT web.
HMRC recovered £326mn following IHT investigations in 2021-22, up from £254mn in 2020-21 and £273mn the earlier 12 months, based on figures launched this week beneath a Freedom of Data request.
“Extra inheritance tax is being recovered from HMRC investigations because of the rising worth of belongings and the potential sums at stake, which justify HMRC spending extra time particular person circumstances,” stated Sean McCann, chartered monetary planner at insurance coverage firm NFU Mutual, which submitted the FOI.
The variety of investigations additionally rose by one-fifth in contrast with the earlier 12 months to 4,258, however nonetheless fell in need of the pre-pandemic common, which ran above 5,000 a 12 months for over 5 years.
HMRC confirmed the variety of inheritance tax inquiries fell throughout the first six months of the 2020-21 tax 12 months when the UK first went into lockdown and the tax authority “reprioritised useful resource to assist folks and companies”.
John Stockdale, a technical officer on the Chartered Institute of Taxation, stated {that a} rise in recent times within the variety of folks reporting the worth of estates to HMRC personally — with out utilizing an adviser — could have led to extra errors in software.
HMRC’s inheritance tax toolkit says that valuations are the “largest single space of danger” accounting for a “giant half” of the company’s compliance checks, noting a number of points across the valuing of properties which might be “simply missed”, such because the potential for the event of land.
Richard Jameson, associate at accounting agency Saffery Champness, stated HMRC has been difficult asset and property values particularly when there was a sale inside two years of dying at the next worth than the submitted probate worth.
“HMRC appears very reluctant to simply accept something apart from the last word sale value as probate worth in these circumstances except there’s a demonstrable change in market situations,” he stated.
Frequent errors folks could make when coping with an property can embody a failure to declare financial institution accounts or unquoted shares or a misunderstanding of the reliefs and exemptions out there.
“With relation to inheritance tax you will have the nil fee band, the residence nil fee band, gifting allowance, doubtlessly exempt transfers, enterprise property aid, agricultural aid and so forth,” defined Rachael Griffin, head of tax and trusts at wealth supervisor Quilter.
She added that with the authorized course of, accuracy is essential. “Not having correct information and holding a observe of actions carried out by an executor can fairly simply end in an investigation being opened,” she stated, including that small errors comparable to spelling errors or the flawed use of names could cause some “severe issues”.
HMRC stated its position is to gather the correct amount of tax due beneath UK regulation. “Instances are opened the place we determine a danger of tax not being paid . . . We respect coping with inheritance tax might be troublesome and we method all circumstances with sensitivity.”
