HM Revenue & Customs have issued details of a recent case to deter others from understating their inheritance in order to avoid paying Inheritance Tax.
A recent case detailed a woman who has been sentenced to two years in jail after lying to the Revenue about the assets she inherited on the death of her aunt. The total value of the inheritance was £1.5million; however, the lady in question completed the forms to the Revenue saying that she only inherited £285,000. She also lied about financial gifts made to her before her aunt’s death.
Estates below £325,000 are not subject to Inheritance Tax. Estates above this amount are taxed at 40%. Married couples or civil partners, who leave their estate to each other on the first death, can take advantage of the transferable nil-rate band. This will give the estate, on the second death, a tax-free amount of £650,000 before Inheritance Tax becomes payable.
There are strict guidelines on gifts during lifetimes which are exempt from Inheritance Tax and large one-off gifts and the 7-year rule.
HMRC confirmed it was not necessary for a solicitor to handle the process; however, as solicitors we can give correct legal advice and instruction on how to proceed when dealing with a taxable estate.