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HMRC internal manual

Technical Teams Operational Guidance

Settling the enquiry: agreeing income profit additions: treatment of inheritance tax

See TTOG4560 where taxpayer is deceased.

You should consider whether any Inheritance Tax liabilities arise from your investigations. In addition to charges arising on death, Inheritance Tax may also be payable during a taxpayer’s lifetime on transfers into and out of trusts or companies and on alterations to a close companies share structure. The basic rule is that if someone does something (undertakes a transaction) that results in a reduction in the value of their estate then there may be a charge to IHT.

You should speak to the Risk and Intelligence Team in IHT (part of Charity, Assets and Residence (CAR)) when:

  • the taxpayer or their agent have indicated or disclosed that there may be IHT liabilities
  • the taxpayer or someone closely associated with the taxpayer dies before or during the investigation
  • the taxpayer has been involved with the setting up of a trust or structure (particularly those situated offshore) or has transactions with or within a close company that results in a reduction in the value of their estate

SI cannot claim the yield for IHT liabilities uncovered in its statistical yield but can claim credit for ‘value added’. Depending upon the apparent IHT exposure for HMRC it may be appropriate for the case to be team worked with CAR IHT or for CAR IHT to work that aspect of the case separately.