HMRC has initiated investigations into approximately 5,000 bereaved families as part of a crackdown on underpaid inheritance tax. Data obtained by accountancy firm Price Bailey reveals that of the 4,940 families targeted for inquiry last year, around 40% had their inheritance tax bill adjusted. The Labour Party government figures underscore a growing focus on inheritance tax compliance.
Scope of Investigations
Under the crackdown, HMRC is scrutinizing bank statements for unreported gifts that could be liable for death duties, as well as property data suggesting an estate may have been undervalued. According to some experts, HMRC will also comb through people's social media accounts to detect undeclared income or assets.
Expert Commentary
Nikita Cooper of Price Bailey stated: “HMRC is coming under increasing pressure to clamp down on non-compliance and boost the tax take, and inheritance tax is becoming a higher priority. Many formal inquiries do not lead to any additional tax, but they still impose a significant administrative and emotional burden on families who have already complied with the rules.”
Cooper highlighted common mistakes: “A key area we see that many clients misunderstand is that there are specific anti-avoidance rules that can apply to making gifts. These effectively ensure that individuals cannot give assets away while continuing to benefit from them without tax consequences, as the gifts will not be valid for inheritance tax reduction purposes. Common mistakes include giving away your home but still living in it, or giving cash to a family member who then buys a property for you to use.”
Social Media Scrutiny
Fiona Fernie of tax firm Blick Rothenberg noted: “It’s unclear how common it is in inheritance tax investigations in particular, but in general, HMRC will certainly look at social media posts. They will be looking to see if somebody who has reported relatively modest income is flying to Mauritius and the Maldives three times a year for their holiday.”
HMRC Response
A HMRC spokesman said: “The vast majority of people pay the correct inheritance tax. Where we identify a risk that a return may not be accurate, we carry out checks to ensure everyone pays the right tax. The number of checks we undertake has simply returned to the levels seen pre-pandemic.”
