HMRC is increasingly raising tax enquiries into inheritance tax returns, especially from unrepresented taxpayers. With inheritance tax rates at 40%, the odd asset missed off or an asset which has been undervalued can make a real difference to the final IHT bill.

With house prices having risen sharply over the last few years and the Inheritance tax nil rate band having been frozen at £325,000, more death estates than ever before are becoming liable to inheritance tax and HMRC are increasingly aware of this.

HMRC are looking more closely at gifts made within 7 years of death, which may be liable to inheritance tax. Such gifts are notoriously difficult to identify and quantify, especially if the deceased did not keep comprehensive records. They are also often misunderstood by executors who do not realise that they need to be included on the inheritance tax return, as they are not assets comprised in the death estate.

HMRC are also keen to investigate the valuation of assets included in the death estate, especially where professional valuations have not been obtained. HMRC are concerned that values may be understated, resulting in a loss of inheritance tax.

As an executor, you should take the same care dealing with a death estate, as you do dealing with your own income tax affairs. You should only sign and submit the inheritance tax return when you are confident that it is complete and correct as far as you are able to do so and that the fullest enquiries have been made to identify and value all assets owned by the deceased at the date of their death.

If you are unfortunate enough to be investigated by HMRC in respect of an inheritance tax return you have submitted, The Tax Angel can help. I will undertake a full review of the return and the questions being raised by HMRC.

My aim is to resolve matters and conclude any HMRC tax enquiry as quickly and as satisfactorily as possible. This will then enable you to apply to HMRC for clearance that the value of the estate has been ascertained and that where relevant, all IHT due has been paid. This will then enable the Grant of Probate to be issued so that the estate assets can be called in and distributed.

In much the same way HMRC are stepping up their enquiries in relation to estates, they are also looking more closely at trusts.

With the introduction of the HMRC Trust Registration Service (TRS), HMRC now have more access than ever before to information regarding trusts, including the settlor, the trustees, and the beneficiaries.

Areas which HMRC may investigate in relation to trusts are as follows:

• Has the trust been registered on the HMRC Trust Registration Service?
• Are there any IHT lifetime charges when the trust was set up and have these been reported?
• Has the settlor declared a capital gain if a chargeable asset has been settled into trust?
• Have any 10 year anniversary charges been identified and returned to HMRC?
• If assets have left the trust, have any IHT or CGT charges been dealt with correctly?
• Based on the assets held in the trust, is a trust and estate tax return due?
• Has a beneficiary declared their share of any trust income on their personal tax return?
• Have any residential property disposals been reported using the 60-day online service?

The tax regime in respect of trusts is complex. A trust is a separate legal entity and has its own set of tax rules, many of which are unique to trusts, such as the ten year charge and tax pool.

It is advisable for trustees to seek professional help to help administer the tax affairs of a trust.

As a trustee you are responsible for reporting and paying tax on behalf of the trust. If there are two or more trustees a principal trustee should be nominated to manage the tax affairs of the trust. This is the trustee HMRC will correspond with.

The Tax Angel can help with all aspects of dealing with the administration of the trust for tax purposes.

If you have already set up a trust, I can the review matters to confirm that the trust is fully tax compliant. If it is identified that there is additional reporting required, I can manage this on the trust’s behalf.

If you have received correspondence from HMRC regarding any aspect of the trust and its set-up, I can review this and advise you what further action is required.

Similarly, if you have received an enquiry from HMRC in relation to a trust of which you are a trustee, I can represent you in your dealings with HMRC, keeping your contact with HMRC to a minimum, whilst agreeing and concluding the tax enquiry with HMRC as smoothly and as quickly as possible.

Whether you a lawyer, an independent financial adviser, or an accountant, you may have a client who has been notified of a tax enquiry by HMRC who may want some advice and guidance in dealing with the investigation.

The Tax Angel can work with you or directly with your client to handle all aspects of the tax enquiry. I will represent your clients’ interests with HMRC and manage all negotiations.

With the right help and guidance tax enquiries can be resolved early and so avoid the need for HMRC to open a full investigation.

If you or your clients have any concerns about any aspect of their own or a trust or estate’s tax affairs, they may be responsible for, please get in touch.

It is well known that penalties for non-disclosure or for errors made in dealing with your tax return are considerably less of you make a voluntary disclosure, rather than wait for HMRC to approach you.

HMRC are increasingly launching initiatives to encourage taxpayers to come forward and make a voluntary disclosure. One of the longest running of these has been the Let Property Campaign. The idea being that HMRC offer a reduced penalty regime to encourage landlords to come forward and declare any previously undisclosed rental income.

In my experience clients want to be tax compliant, but sometimes for various reasons they have fallen behind in managing their tax affairs or have just never got around to making their property rental business official. In most cases and for their own peace of mind, clients do want to bring their tax position up to date, but do not know where to start and are worried about making the problem even worse.

The Let Property Campaign provides an ideal solution. The ability for someone to make a voluntary disclosure, (you can even include non-property income in the declaration) with reduced penalties, although interest is still charged on any tax paid after the due date.

If you or your clients would like an informal chat about how I can help you deal with a tax enquiry from HMRC, or you may want some guidance about how to make a voluntary disclosure to HMRC, please contact The Tax Angel.

I can help with the following;

• Explaining the matter being investigated so that you fully understand and can correct any issues at an early stage of the enquiry.
• The reason why the matter may be investigated.
• If you have dealt with your own tax affairs, review any submissions you have made to HMRC.
• Identify any inaccuracies or omissions.
• Prepare any disclosures to submit to HMRC to bring your tax position up to date.
• Advise and calculate any interest and penalty charges.
• Handle any negotiations with HMRC.
• Agree the most cost-effective way to bring your tax position up to date and conclude the enquiry.
• Apply for a closure notice from HMRC on your behalf to confirm that your tax affairs have been brought up to date and all relevant tax, interest and penalties have been settled.