- On July 22, 2019
A QUARTER of all estates liable for Inheritance Tax (IHT) are now being probed by HM Revenue & Customs each year, an investigation has revealed.
A Freedom of Information (FOI) request by wealth management firm Quilter has found that some 5,537 investigations were carried out in the last year by the authority.
This represents a 7.8% jump since the introduction of the Residence Nil Rate Band (RNRB) in April 2017. The RNRB is designed to allow individuals to pass on the family home free from Inheritance Tax up to a capped amount.
Quilter spokesman Gordon Andrews said that “more often than not” people are not attempting to defraud HMRC but the current complexity of the tax means that it’s “no surprise if things go awry”.
“Inheritance tax is infamous for being not only disliked, but complex and at times deeply unfair. On top of everything, there is almost a one in four chance HMRC will investigate your estate.
“Over the past number of years politicians have been keen to show they are cracking down on tax-dodgers and IHT is one of the departments that HMRC has been throwing its resources at.
“For instance, under the current rules, if a pension transfer is made while someone is in ill-health then there is a risk that HMRC will challenge the IHT-free status of the death benefits if the person passes away within two years of the transfer.
“This is absurd at the best and perverse at worst as it is essentially penalising people for appropriate tax planning,” he claimed.
The complicated rules surrounding IHT mean it’s crucial to get the appropriate advice when it comes to minimising the amount of Inheritance Tax you have to pay. Family Estate Planning can help with all aspects of estate planning.
IHT is a tax on an individual’s estate that is paid when they die. It is levied on everything, from property, cash, possessions and vehicles.
Currently, everyone is entitled to £325,000 tax free, with any assets above this liable to a tax of 40%.
The RNRB gives homeowners an additional tax allowance for their home which will reach £175,000 in April 2020. This means that couples have effectively £1,000,000 in assets free from inheritance tax, if the property is left to direct descendants.
There are several other conditions that need to be met to qualify for the full RNRB leading to criticism from many quarters about the complexity of the relief added to the already labyrinthine IHT rules.
For advice about Inheritance Tax email firstname.lastname@example.org or call Andy on 07984 013533.