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More than 60% of adults in the UK still have no will. This tells us that many of us are still not planning for later on in life – but believe it or not, there is a really good reason to do so.
None of us like to think about getting old or what will happen to us in later life. That much is evident from one of our recent blogs, which highlighted real risks for people dying intestate. However, a new risk has come to light and the consequences for bad planning in this instance could be extremely costly.
Last year, HMRC investigated some 5,400 estates for the under payment of inheritance tax (IHT). For those considering taking their chances, it is easy to see why they might be tempted to under value their estates to save on IHT. However, if HMRC deems an estate to be undervalued, particularly in relation to property, there could be hefty fines to pay. In fact, HMRC could even double the tax through penalties. For the non-cash-rich beneficiary, this is not ideal.
IHT is payable on estates for more than £325,000 – or £450,000 is the deceased main residence is included and passed on to a direct descendant. It makes IHT one of the biggest contributors to the public purse – but it is probably the most controversial one too.
HMRC is looking for three things. They are the (accurate) value of the assets in the estate, whether any tax relief claims are valid, and/or where any assets have been deliberately omitted. The valuation aspect is the key area that HMRC is particularly hot on and often involve the District Valuer where there is property.
There is a difference here. Where an incorrect value has been placed on an estate, and HMRC can prove it has been done deliberately or without reasonable care, this will be liable to a fine. However, if you have sought professional advice and you can prove you were acting honestly, you will not be charges because you will have done the right thing.
IHT is a particularly complex area of tax and the associated legal areas. If you would like some advice relating to IHT, wills, trusts or probate, contact Downs Solicitors to see how we can help.