Photo of house on a key ring to represent residential property

HMRC ramps up IHT investigations

HMRC ramps up IHT investigations as it looks to cash in on rising asset prices – 5,400 families hit last year

HMRC has increased its investigations into Inheritance Tax (IHT) as it looks to squeeze more from its compliance activities in this area. 5,400* families were investigated over their IHT returns last year, up 5% from 5,100 in 2016/17.

Research has revealed that 24%** of the total estates liable for IHT were investigated by HMRC over the last 12 months. So that is a one-in-four chance of being investigated.

Rising asset prices, such as residential property, in recent years has meant the amount of IHT at stake in each investigation has increased. This has acted as an incentive for HMRC to be more active in its investigations in this area.

If an investigation finds that IHT has been underpaid, the estate may have to pay all of the tax owed plus a penalty, which could be up to 100% of the tax at stake.

With the potential to be hit with such large penalties, families need to be careful when valuing assets to ensure that they pay the correct amount of IHT. HMRC are likely to investigate three main areas when examining an IHT return:

  • Whether the figures submitted correctly reflect the market value for assets
  • Whether claims for business or agricultural reliefs are valid
  • Whether assets have been omitted deliberately or due to a lack of reasonable care

Estates need to take special care when valuing residential properties as HMRC, in some cases, add additional value to properties due to the potential for refurbishment, development or attached land. This can lead to the miscalculation of an estate’s value which leaves taxpayers exposed to considerable penalties.

IHT investigations are not only costly and time consuming but also come at the worst time for many families. Taking care when filing a return is therefore paramount.

We are IHT specialists and you can protect yourself against the cost of most tax investigations by subscribing to our Tax Investigation Service.

To find out more contact us on 01242 776000 or email

*HMRC 2018

**Land Registry, June 2018