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From Certificates to Belief Statements: The CPS and the Limits of Forum Bar Intervention
Rebecca Niblock
The Telegraph recently reported that HMRC is “targeting bereaved families with a raid on inheritance tax after it clawed back a record £326m through investigations last year”. This will be a worry to many families, given that Inheritance Tax (IHT) is arguably no longer just a tax on the super-wealthy.
With house prices having increased so much over the years, many estates comfortably exceed the tax-free nil rate band, which has been fixed at £325,000 since 2009/10 and will continue to be fixed until at least April 2028. Some families may be helped by the additional “residence nil rate band”, if the conditions are met, but this only provides an additional £175,000 allowance (which is also fixed), or a maximum of £350,000 for married couples or civil partners. The benefit of this additional allowance is in any event gradually withdrawn for estates exceeding a value of £2m.
Estates with a total asset value of over £2m have been identified as those which will attract more scrutiny from a dedicated investigations team at HMRC. The tax authorities are under a lot of pressure at the moment to tackle tax avoidance, but in many cases, it is likely that families have not knowingly misled HMRC or withheld information. When dealing with the administration of an estate and the mammoth task of fact-finding in order to complete the IHT papers, it is easy to slip up, or at least struggle to report values with complete confidence.
One area of difficulty, which is flagged in the Telegraph article, is gifts made within seven years of death. The level of such gifts can have a significant bearing on the IHT payable, but it is often a difficult area for personal representatives to tackle. In most probate matters we deal with, we find that the deceased did not keep clear records of gifts made. To conduct a thorough analysis essentially relies on someone recalling that gifts were made, alongside an exercise of trawling through the deceased’s bank statements to try to identify any gifts.
Another area it is easy for personal representatives to fall down on, particularly when they have not instructed a solicitor to assist with the estate, is valuing assets. Most people realise that HMRC will look very closely at property values. A RICS valuation is generally a good idea for this; rather than relying on estate agent appraisals. It is also however essential to show that similar care has been taken to value “personal chattels”. It is all too easy to insert a total figure for chattels on the relevant IHT form. If however there is any question as to whether an item might be of value (i.e. over £1,500), then the safest course of action is for that item to be individually valued by someone appropriately qualified. The valuation should then be included with the IHT papers when sent to HMRC.
There is little that can be done about HMRC looking at estates more closely with a view to recovering more IHT. The best thing that individuals can do however, is:
- Ensure that, where possible, an accurate written record is kept of any gifts made during lifetime;
- Have a valid, professionally-drafted Will in place which is structured so as to take advantage of any IHT exemptions, makes your wishes completely clear and appoints appropriate people as executors;
- Nevertheless, executors should always read the declaration they will have to make in the IHT return, understand their responsibilities and only submit the IHT return when they are confident that they have satisfied their obligations; and
Once the value of the estate has been ascertained and all IHT has been paid, apply to HMRC for a clearance certificate using form IHT30. Clearance from HMRC confirms that no further tax is due, albeit it is important to note that this is subject to certain conditions, so it does not completely guarantee that the estate will not have to pay more tax later on.
A version of this article was first published by Tomorrow's Wills & Probate on 20/01/2023.
FURTHER INFORMATION
If you would like any further information or advice about the topic discussed in this blog, please contact Stephanie Mooney or our Private Client team.
ABOUT THE AUTHOR
Stephanie Mooney is a Senior Associate in the Private Client team . She advises on succession planning, the preparation of Wills, inheritance tax, trust creation and administration, mental capacity and the administration of estates.
We welcome views and opinions about the issues raised in this blog. Should you require specific advice in relation to personal circumstances, please use the form on the contact page.
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