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IHT investigations soar following residence nil rate band introduction

HM Revenue and Customs is opening an average of 5,000 investigations each year into inheritance tax – a 7.8 per cent increase since the introduction of the residence nil rate band.

Introduced in April 2017, the RNRB applies to individuals with direct descendants who have an estate exceeding the IHT threshold of £350,000.

The rate is currently set at £150,000 and is set to rise to £175,000 in April next year.

HMRC figures show nearly 25 per cent of all estates that pay inheritance tax are investigated.

A freedom of information request from Quilter revealed that of the 22,000 estates in 2018/19 that were liable for IHT, 5,537 investigations were launched.

This is up from 5,354 in 2017/18 and 5,138 in 2016/17.

Quilter tax and financial planning expert Gordon Andrews says the findings reflect the UK’s complicated tax system.

He says: “IHT is infamous for being not only disliked, but complex and at times deeply unfair. On top of everything, there is almost a one in four chance HMRC will investigate your estate.

Danby Bloch: All you need to know about the residence nil rate band

“Over the past number of years politicians have been keen to show they are cracking down on tax-dodgers and IHT is one of the departments that HMRC has been throwing its resources at.”

The amount of HMRC investigations could also show a wider distrust in consumers, Andrews adds.

He says: “This is absurd at best and perverse at worst as it is essentially penalising people for appropriate tax planning.

“Most often people aren’t deliberately trying to defraud HMRC and given the current complexity of the IHT system, it’s no surprise if things go awry.”

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  1. Richard Cropley 22nd July 2019 at 11:57 am

    Isn’t the IHT threshold £325,000 not £350,000?

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