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A quarter of estates that pay IHT are investigated by HMRC

22/07/2019

The complexity around the UK Inheritance Tax system has been highlighted once more in a freedom of information (FOI) request from Quilter. Data shows over 5,000 inheritance tax (IHT) investigations are opened by HMRC each year.

This is nearly 25% of all estates that pay inheritance tax as figures from HMRC show that there were around 22,000 estates liable for IHT in the 2018/19 tax year.

Tax year

# of IHT investigations opened

18/19

5537

17/18

5354

16/17

5138

15/16

5907

14/15

5462

13/14

6088

The number of IHT investigations have grown by around 7.8% following the introduction of the Residence Nil Rate Band (RNRB) in April 2017. This allowance made the already complex system even harder to navigate. Indeed, the recent Office of Tax Simplification report highlighted that some solicitors choose not to advise clients on the allowance due to its complexity.

Gordon Andrews, tax and financial planning expert at Quilter comments:

“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.

“More often than not people aren’t deliberately trying to defraud HMRC and given the current complexity of the IHT system it’s really no surprise if things go awry.

“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.   

“All the complications surrounding inheritance tax means getting financial advice is crucial to mitigate the chances of an investigation. It’s also vital to choose the right executor because the onus is on them if there is an investigation. Equally, if you are asked to be an executor of the will you need to understand the responsibilities that come with it. This is not just another piece of admin, it can be an involved and time-consuming process.”

For more information contact

Kathleen Gallagher023 8072 629307990 004932kathleen.gallagher@quilter.com

Notes to Editors:

About Quilter plc:

Quilter plc is a leading wealth management business in the UK and internationally, helping to create prosperity for the generations of today and tomorrow.

Quilter plc oversees £118.7 billion in investments (as at 30 September 2019).

It has an adviser and customer offering spanning: financial advice; investment platforms; multi-asset investment solutions; and discretionary fund management.

The business is comprised of two segments: Advice and Wealth Management and Wealth Platforms.

Advice and Wealth Management encompasses the financial advice business, Quilter Financial Planning; the discretionary fund management business, Quilter Cheviot; and Quilter Investors, the Multi-asset investment solutions business.

Wealth Platforms includes Old Mutual Wealth UK platform; Old Mutual International, including AAM Advisory in Singapore; and the Old Mutual Wealth Heritage life assurance business.

The Quilter plc businesses are being re-branded as follows: 

  • Quilter Financial Planning (previously Intrinsic)
  • Quilter Private Client Advisers (previously Old Mutual Wealth Private Client Advisers)
  • Charles Derby Group (becoming Quilter Financial Advisers)
  • Quilter Financial Adviser School
  • Quilter Cheviot
  • Quilter Investors
  • Old Mutual Wealth (becoming Quilter Wealth Solutions in 2020)
  • Old Mutual International (becoming Quilter International in 2020)

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This communication is issued by Quilter plc.  Registered office: Millennium Bridge House, 2 Lambeth Hill, London EC4V 4AJ, United Kingdom. Registered number: 6404270.  Registered in England.