Incorrect account, information or document: when is an account, information or document incorrect?
An incorrect account is one which either
- omits appropriate property (IHTM10802), or
- fails to include property at its open market value (IHTM09703) or provide a provisional estimate of value (IHTM10813) in accordance with the provisions of IHTM/S216 (3A).
An incorrect account, information or document will only result in a penalty if it falls within one of the penalty provisions (IHTM36102) contained in the legislation.
A penalty cannot arise as a result of an incorrect calculation of tax.
Incorrect relief or exemption
If a relief or exemption is incorrectly included in an account this will not normally in itself make an account incorrect. (The exception to this is loss on sale of shares (IHTM34001) or loss on sale of land (IHTM33001) reliefs, where the relief has to be claimed). But if incorrect information is furnished or an incorrect document is produced, and the taxpayer has relied on this in suggesting that a relief or exemption might be due, then the refusal of relief may result in a penalty. Please refer any case of doubt or difficulty where a claim for relief or exemption has been denied or where the claim in the original account appears to be spurious or without foundation, via your B2 manager, to the Penalty Portfolio Holder .
Liabilities claimed as deductions
Liabilities are not ‘appropriate property’ as defined in IHTA84/S216 (3) but where liabilities are notified the taxpayer is providing information and in doing so is required to act prudently and carefully to ensure that the information is correct. If therefore a liability is substantially reduced or withdrawn at a later date you will need to investigate the circumstances in which the liability was originally claimed. Where, for example, a non- existent liability is negligently included in the account or an estimated value has been arrived at carelessly you should seek a penalty.
You should take care however to distinguish between liabilities where the validity of the claim is dependent upon factual matters and those where the claim is based upon often complex legal provisions such as debts allowed under the law but not allowed under the inheritance tax provisions. Please refer any case of doubt or difficulty, via you B2 manager, to the Penalty Portfolio Holder.
With effect from 20 September 2000 taxpayers can deliver reduced accounts (IHTM10471) in death estates, provided certain conditions are satisfied. When completing a reduced account personal representatives are able to include their own estimates of value for an asset passing to an exempt beneficiary, without having to make ‘the fullest enquiries that are reasonably practicable’.
A reduced account may still be regarded as incorrect if it contains incorrect or incomplete information but you should not regard it as incorrect because of the personal representatives’ own estimate of value.
If a corrective account is subsequently required then the corrective account must include open market values. The values in the corrective account replace any previous estimated values in the event any penalty investigation is required.