Hot on the heels of three recent consultations in the powers series (see our article Before the Budget: HMRC powers and taxpayer rights), HMRC published draft legislation following up proposals to align Inheritance Tax (IHT) record-keeping requirements and time limits with other taxes.
Our response argues that IHT differs from other taxes to such an extent that it should have separate rules on record-keeping and time limits. Recreating records for preparation of IHT accounts is often a challenging task.
Executors and administrators for even small estates may be faced with the task of recreating the deceased’s records before they can establish whether an IHT account is due. Particularly difficult cases might include dealing with the estate of someone who was suffering from dementia or similar illness. Due to funding care costs, they may have very little capital left on their death but their representatives will need to track back over the previous seven years to establish whether IHT is relevant.
Those who turn to advisers for help will incur costs as advisers of course need to ensure that a thorough job is done in order to comply with HMRC rules. But at the end of all this work, there may be no tax liability.
Imposing stringent record-keeping requirements and foreshortened time limits therefore seems inappropriate.
If the IHT regime is to be aligned with other taxes, we argue that very clear HMRC guidance is required so that taxpayers are treated fairly, particularly where penalties are at stake.
To read our full response please use the link below.
Contact Name: Kelly Sizer (Tel: 0844 579 6700, Fax: 0844 579 6701)
To open the file click below:
Compliance Checks - IHT compliance - LITRG response