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Executors must ensure that all IHT-related matters are handled diligently including notifying HMRC, calculating and making payments in line with all relevant rules and laws.

Article by Akwasi Duodu

A guide to HMRC & inheritance tax

Inheritance Tax (IHT) is a tax on the estate of someone who has died, including all property, possessions, and money. The management and enforcement of IHT falls under the remit of Majesty’s Revenue and Customs (HMRC).

Understanding how HMRC handles IHT is crucial for executors and beneficiaries to ensure compliance and avoid potential penalties. Today’s article covers many of the key questions people search for online about this topic.

The information in this article is designed to help you understand the facts surrounding this topic and to help you follow the correct steps when submitting information to HMRC.

Related reading

What is the deadline for paying an inheritance bill?

To avoid paying interest, IHT must be paid by the end of the sixth month after the person’s death. Furthermore, if you are an executor, you can choose to pay the tax on certain assets, such as property, in installments over ten years.

How do I pay an inheritance tax bill to HMRC?

Firstly, you need to get a payment reference number to pay an IHT bill. Once you have that, there are various ways you can pay.

You can pay from your bank account or a joint account held with the deceased individual. Payments are typically paid online through bank transfer. Alternatively, you can also pay using telephone banking, at your bank or building society, or by cheque through the post.

HMRC will write to tell you when you’ve paid all the Inheritance Tax and any interest you owe.

Related reading: The simplest way to pay an inheritance tax bill

What happens if you pay an inheritance tax bill late?

If an IHT bill is not paid within six months from the end of the month in which the death occurred, you may be charged interest on the outstanding amount. Additionally, there may be penalties if the IHT account is submitted late or if there are inaccuracies that result in underpaid tax.

Does HMRC investigate inheritance tax submissions?

Yes, they have the authority to investigate IHT matters. Investigations can be random or triggered by discrepancies in the figures reported, the complexity of the estate, or large gifts made before death.

HMRC aims to ensure the correct level of IHT is paid and that all reliefs and exemptions are appropriately applied.

How far back can HMRC go to investigate inheritance tax?

HMRC can investigate IHT affairs going back up to 20 years. However, they typically focus on the seven years before the deceased’s passing, as this is the period during which gifts can be potentially subject to IHT due to the seven-year rule.

Where there are suspicions of deliberate noncompliance, HMRC may look back the full 20 years.

Related reading: HMRC inheritance tax clawbacks rise to £326m

How long does It take for HMRC to check your inheritance tax filing?

The standard period for IHT investigations by HMRC can take between six to twelve months. However, this timeframe can vary depending on the complexity of the estate and the accuracy of the information provided.

If additional information is required or if there are disputes over valuations, the process can take longer.

How long does HMRC take to process inheritance tax payments?

Once the IHT account is submitted, HMRC aims to process payments and provide clearance within six weeks. However, this can take longer if there are queries or issues with the submission.

As a result, it is important to submit accurate and complete information to avoid delays.

HMRC & inheritance tax – summary

Dealing with HMRC in the context of IHT requires a thorough understanding of the rules and regulations. Executors must ensure that all IHT-related matters are handled diligently to avoid investigations, interest, and penalties.

It is often advisable to seek professional inheritance tax advice to navigate the complexities of IHT, ensuring that all potential liabilities are addressed and that the estate is compliant with HMRC requirements.

Timely and accurate reporting, along with maintaining good records, especially of gifts, can help streamline the process and prevent complications with HMRC.

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