HMRC are taking a hard line to the application of penalties

We are seeing that H M Revenue & Customs are taking a more hard line and aggressive attitude to the application of penalties in relation to returns for Inheritance Tax purposes

The Finance Act 2007 provides that a penalty is payable where a document contains an inaccuracy which amounts to or leads to:

• An understatement of the liability to tax
• A false or inflated statement of a loss
• A false or inflated claim to repayment of tax

and the inaccuracy was careless or deliberate

For an error which is careless that is to say indicates a failure to take reasonable care the penalty can range to from 0% to 30% of the tax underpaid.

If the error is deliberate and concealed the penalty will range from 30% to 100%.

Case law is presently highlighted in relation to two particular areas, incorrect land valuations and unjustified claims for the transferred Nil Rate Band.

The IHT400 Toolkit says that in relation to valuations it is important to instruct a qualified independent valuer to make sure that the valuation is made for the purposes of the relevant legislation, and for houses, land and buildings meets Royal Institution of Chartered Surveyors or equivalent, standards.

It is then important to look critically at the valuer’s report for example to take into account events occurring after the receipt of the valuation.

So far as unjustified claims of a Transferred Nil Rate Band are concerned there are particular issues, for example between March 1972 and November 1974 the spouse exemption was limited to £15,000 and there is a trap in relation to gifts to charity, in that before 1972 there was no such exemption.

Fighting HM Revenue & Customs is never a pleasant prospect. To avoid such problems we work closely with our clients in relation to obtaining and presenting the appropriate professional advice in relation to the completion of the IHT400 and supporting schedules.

For more information, please contact me.

Judy Dyke
Solicitor
Private Client

0121 693 2222
Email Judy through the Contact Us page