The recent HMRC investigations into small business tax, including that of plumbers and restaurants, have received fairly wide publicity. However, according to accountancy firm UHY Hacker Young, there is another area which HMRC have been quietly spotlighting over the past year and that is inheritance tax.
Over the course of 2010 HMRC investigated 9,368 inheritance tax valuations raising an additional £70 million in the process. Although inheritance tax generally only applies for estates in excess of £325,000 the rise in house prices over the past decade has lead to many being caught by the inheritance tax threshold. With average house prices in London now running at over £400,000 it could be tempting to undervalue property thus avoiding the tax.
As part of its review HMRC are advising beneficiaries to take care when valuing assets and in the case of property to either seek a number of valuations or engage a professional valuer. Those administering estates who are deemed not to have taken reasonable care could find themselves not only having to pay the outstanding tax but also a fine of up to the equivalent of the outstanding tax. An undervaluation of £10,000 could therefore leave the executors facing a payment of £4,000 missed tax plus a further £4,000 penalty.
Often it is not just the cost of property that needs to be taken into consideration. Gifts, particularly made in the last seven years of a life need to be reviewed as do investments, life policies and pension plans. Although deliberately undervaluing a property is not allowed there are some perfectly legal ways of mitigating the effects of inheritance tax. The sooner these are reviewed the easier it is to plan a tax mitigation strategy.
As tax mitigation specialists Newshams are able to give advice on Inheritance Tax and other taxes, how tax may affect any private or business transaction and how to put in place an effective mitigation strategy.
Contact us now on 020 7470 8820 and ask to speak to a tax adviser about how we can reduce your tax costs or e-mail us at firstname.lastname@example.org and we’ll get straight back to you.
16th June 2011