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HMRC internal manual

Inheritance Tax Manual

Negotiating a settlement: when to consider negotiation

You should consider negotiating a settlement where the issues are not clear cut and the taxpayers cannot be persuaded that your point of view is the correct one.  Negotiation can be by means of letter but more often it is best done at a meeting (IHTM09062) or over the telephone.  Examples of the sort of situations where you might enter into negotiations to break a deadlock can be found on the next page (IHTM09072).  These are mainly situations where there are factual uncertainties or where there are valuation issues where views can be subjective.  You must not negotiate matters of law.  If the validity of a claim for tax or its extent is disputed on a point of law, a lower figure than the full amount of tax involved may only be accepted by way of compromise with the authority of Litigation.

You should only seek to enter into negotiations once you have all the information that can reasonably be obtained.  If agreement cannot be reached then you are entitled to take a view based on the information that is available.  You do not have to establish matters beyond reasonable doubt.  For example, if there are unexplained withdrawals from the deceased’s bank account you do not have to establish where the money went to treat the withdrawals as gifts.  There may be evidence such as the payment of similar sums to other relatives, which suggest that they are likely to be gifts.  It is in these sorts of areas that you need to make judgements and negotiate agreements.    

There are separate instructions for negotiating penalties. (IHTM36000 reference to the Compliance Handbook at CH80000 and CH400000)