HM Revenue & Customs’ (HMRC) Inheritance Tax (IHT) investigations have generated a record £274 million in additional revenue in the tax year 2019/20, new figures have revealed.
The research, published by data procurement firm Estatesearch, highlights the complexities of the IHT system, with thousands of families miscalculating how much they owe.
According to the study, HMRC reported a “four year high” in takings after securing an additional £274 million from 5,638 estate administration investigations in the last tax year.
Experts point to two reasons why huge – and rising – sums of IHT are being taken. The first is the complexity of the system itself, particularly with families “misunderstanding or misinterpreting” the rules around issues such as gifting.
While most families understand that gifts can sometimes be transferred between loved ones tax-free, few fully understand the accompanying seven-year rule.
Experts also suggest that the digitisation of the probate system is increasing the risk of inexperienced executors making applications without professional support – leading to millions of pounds in IHT going unreported.
Commenting on the figures, Ben Furlong, Client Services Director at Estatesearch, said: “It seems likely that if HMRC is successfully challenging Executors accounts, and in doing so increasing tax receipts they will only continue to do so.
“Certainly, with the anticipated increase in estate values over the coming decade, owing to wealth amassed by the Baby Boomer generation, it would seem a ready target for HMRC investigators.”
This latest report highlights the importance of working with an experienced legal adviser when preparing your estate to reduce the prospect of paying IHT through careful planning.
By arranging your affairs with professional advice, it may be possible to significantly reduce any IHT liabilities on an estate using existing reliefs and arrangements, while also avoiding any errors during the probate process.
For more later life planning and support, please get in touch with our expert team today.