IHTM36176 - Calculating the penalty: culpable tax
The culpable tax to which the penalty loading is to be applied is that due as a result of fraud (IHTM36291) or negligence (IHTM36301), provided the time limit (IHTM36108) for commencing penalty proceedings has not expired.
Calculating the culpable tax is straightforward if there are only culpable additions to the estate and no decreases. The additional tax payable as a result of the culpable additions is the culpable tax. But bear in mind the instructions at IHTM36103.
If there are not only culpable increases but also decreases, resulting from say additional liabilities or an IoV (IHTM35011), the net additional tax after deducting the decreases is the culpable tax.
However, if there are both culpable and non-culpable increases, you should apportion the net additional tax between the culpable and non-culpable increases to arrive at the culpable tax.
Example
Chargeable estate returned on the IHT400 = £501,730
Non-culpable additions = £5,000
Culpable additions = £54,000 & £59,000
= £560,730
Decreases
(11,000)
Final chargeable estate
£549,730
Final tax (based on a tax threshold of £250,000 = 119,892
Original tax = 100,692
Additional tax = 19,200
Culpable tax is 19,200 X 54,000/59,000 = 17,572
Penalty is calculated on £17,572