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Death, Taxes and Penalties: greater pressure on recording and evidence

There are many who consider that the rate of 40% Inheritance Tax (IHT) is very punishing, especially those who consider the tax unfair as for many it is seen to be taxing retained earnings twice. It is therefore important to beware of the relatively new penalty regime which could add further to the liability.

The behaviour based penalty regime was introduced by Schedule 24 FA 2007 from 1 April 2008.  It was believed to be HMRC showing that they wanted to punish those who do not comply with heavy penalties for non-disclosure.  Schedule 40 FA 2008 extended the behaviour based penalty regime introduced in Schedule 24 to IHT.

At a practical level the HMRC approach to IHT enquiries has moved from “benign to battling”. It has been said that the only two certainties in life are death and taxes and the penalty on incorrect disclosure is still uncertain but enquiries into farming estates is certain post 1 April 2009.