HM Revenue & Customs launched 9,368 investigations into inheritance tax valuations last year and is targeting estates and beneficiaries, warns UHY Hacker Young, the national accountancy firm.
Based on HMRC figures, UHY Hacker Young says approximately £70m of additional tax was raised as a result of HMRC challenging the valuations of properties included in the estate of a deceased person in 2010. Inheritance tax is typically payable if the assets of an estate are more than £325,000. The average house price in the South-east is £274,000, rising to £410,000 in greater London.
UHY Hacker Young explains that if an inheritance tax valuation is found to be incorrect and HMRC considers that "reasonable care" was not taken in establishing it, the estate and its beneficiaries could face a fine of up to 100 per cent of the additional tax liability, as well as the additional tax due. "If a property is undervalued by £20,000, this could result in an additional £8,000 tax, plus, say, a 30 per cent penalty of the additional tax, making a total of £10,400," Mark Giddens, Partner at UHY Hacker Young said. Where additional tax was payable the average sum was £24,600.
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