HMRC income from IHT investigations hits four-year high
Ben Furlong, Client Services Director at Estatesearch, has shared with Today’s Wills and Probate his insights into inheritance tax investigations.
HM Revenue & Customs (HMRC) has recently reported a 4-year high in takings as a result of Inheritance Tax (IHT) investigations. HMRC took an additional £274 million following investigations into 5,638 estate administrations for the tax year 2019-2020.
Some point to complexities in IHT taxation, which can lead families managing their own probate into misunderstanding or misinterpreting rules around issues such as gifting. Others point to the rise in personal online probate applications. Arguably due to the ongoing Government effort to digitise services and move them online, making applying for probate increasingly accessible to lay executors.
As with most things the two are unlikely to be mutually exclusive, and the true cause is likely to be a mixture of both factors in addition to other variables. Nevertheless, I’m sympathetic with industry concerns about the increasing ease of access for lay Executors to make individual applications, but reports like this clearly highlight the benefits and value that professionals can provide for clients. Even those wishing to remain more ‘hands-on’.
It seems likely that if HMRC are successfully challenging Executors accounts, and in doing so increasing tax receipts they will only continue to do so. Certainly, with the anticipated increase in estate values over the coming decade, owing to wealth amassed by the Baby Boomer generation, it would seem a ready target for HMRC investigators.
With this then comes a greater need to understand the available tax allowances and exemptions so that inheritance can be passed in the most efficient manner. So while future Executors may be drawn to managing the process themselves, this could in fact be a false economy. Professionals familiar with the rules and process have huge value to add, even if it’s not directly through reduced IHT payments (I’m sure not all DIY estate are managed badly!) then through speed, efficiency, or peace of mind.
The industries challenge then is to effectively communicate and educate legal service consumers about the benefits and value that professional assistance delivers. This also may require firms to think innovatively about their practices and business models. Re-imagining and designing services to support the needs and expectations of modern more technologically adept consumers.
You can read the thoughts of others on LinkedIn here