HMRX clawed back £108 million – £34,704 extra tax per case.

HMRC has increased the amount of extra tax it brings in through challenged to the valuation of estates for Inheritance Tax purposes by 23% in the last year.

HMRC brought in an additional £108 million through these challenges in 2013 up from £88 million is 2011/12. Research explains that following the death of a homeowner, HMRC often look more dep into the valuation of the property they have left behind to ensure that the right amount of inheritance tax is being paid on it.

Mark Giddens, partner, says ‘Last year HMRC increased the amount of extra tax it took through investigations into proper valuations for inheritance tax far faster than house prices rose’ (2012)

‘That suggests that they are taking a pretty aggressive approach and are perfecting their techniques for challenging property valuations submitted to them. With house prices set to rise further in the coming year, that will push more properties above the minimum threshold, it is likely that IHT will continue to be a lucrative area for HMRC to focus on.

Our analysis shows that when HMRC receive an Inheritance Tax return, they check registry records of the sales of other properties in the area to identify whether the valuation put on the inheritance tax return is lower than it should be. They also check whether there have been any refurbishments or extension to the property that might have increased its value, but have not been taken into account.

Mark adds ‘HMRC might also challenge a property valuation if it seems low relative to the price that the deceased paid for the property. However, this ignores the possibility that the deceased over-paid for the property in the first place or maintained it poorly.’

In the last year, in cases where HMRC was successful in arguing for a higher valuation for a property, it raised an average of £34,704 in additional tax. This is up from an average of £27,227 in 201-12.

Our research shows the Government has significantly raised its estimate of the likely take from Inheritance Tax since the March budget. In the Autumn Statement the Government announced that it expects to receive £21.4bn in inheritance tax between 2013/ 14 and 2017/ 18, an increase of 16.5% compared to it’s estimate in March. It anticipates that the additional revenues will be due to house price increases and new anti avoidance measures.

Jan 2014