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HMRC internal manual

Inheritance Tax Manual

Other issues: penalties for incorrect claim for transferable nil rate band

IHTA84/S247(2) has been amended so that the difference in tax on which a penalty is calculated can include the liability of another person, but only where IHTA84/S8A applies in establishing that person’s liability. This means that if an incorrect account is delivered on the first death, as a result of which there is an overstatement of transferable nil rate band on the second death, the tax underpaid on the second death as a result of the incorrect account is in point in calculating the penalty that is due in connection with that incorrect account. This change takes effect from 21s t July 2008, so it can only apply where an incorrect account in relation to the first death is delivered after that date.


On the first death in August 2008, the executors - in the knowledge that there is no liability on that death - do not make full enquiries about the deceased’s estate and as a result, deliver an incorrect account.

When the second death occurs in January 2009, these executors deliver their account and include a claim for transferable nil rate band based on the (incorrect) information contained in the earlier account. The nil rate band available for transfer is overstated by £100,000.

Our subsequent investigations reveal errors on the first death and the transferable nil rate band is corrected. This gives rise to an additional liability of £40,000 on the second death.

The executors on the first death may be liable for a penalty under IHTA84/S247(1) if it can be shown that they delivered an incorrect account negligently. Normally, the penalty is calculated by reference to the liability on the first death alone - which will be nil in these circumstances. However, because IHTA84/S247(2) has been extended to take into account the liability to tax of another person - but only where that liability is calculated through the operation of IHTA/S8A - the additional tax payable on the second death as a result of adjusting the transferable nil rate band can be used in calculating the penalty payable by the executors of the first death as a result of the delivery of their incorrect account.