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    HMRC investigates 2,000 families for IHT shortfall

    PLEASE NOTE: Information in this article is correct at the time of publication, please contact DFA Law for current advice on older articles.

    By Rachel Timms

    The Times recently reported that more than 2,000 families are under scrutiny by HMRC this tax year for potentially underpaying inheritance tax when dealing with a person’s estate.

    HMRC opened 2,029 investigations between April and November 2023 alone with over 3,100 investigations being opened in the previous tax year, recovering £251 million in unpaid inheritance tax.

    When a person passes away it is not compulsory to instruct a solicitor to assist with the administration of an estate. In fact, many people choose to administer the estate of a loved one without the assistance of a professional. However, often an estate can appear to be straightforward when in fact there may be several matters that could easily be overlooked leading to inheritance tax being underpaid or, in some cases, not paid at all.

    One of the main areas that is being investigated by HMRC when it comes to inheritance tax being underpaid is the gifts that a deceased may have made during their lifetime. If a person made gifts, whether it be of money or property, in the 7 years prior to their death then inheritance tax may be payable on those gifts. This is something that many families do not know is something they need to consider when dealing with a person’s estate.

    As well as recovering the underpaid inheritance tax, HMRC also charges interest on the late payment of inheritance tax that is due. Interest is currently charged at a rate of 7.75% and can therefore add a considerable amount of money on top of the inheritance tax itself.

    It is therefore vital when making any distributions from a person’s estate that the Executor is sure that there is no possibility of a HMRC investigation being undertaken. Otherwise, there is a risk that they could find themselves personally liable for any shortfall of inheritance tax if there are insufficient assets remaining in the estate to pay the tax which is due.

    Given the current approach from HMRC it is more important than ever to obtain advice at an early stage in the administration of an estate to establish the correct inheritance tax position.

    If you would like any advice on anything contained in this article please contact our Wills, Trusts and Estates team by email here or by calling 01604 609560

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