13:14 PM, 3rd November 2010, About 13 years ago
Wealthy families with complicated inheritance tax (IHT) avoidance schemes are the likely targets of tax ‘hit squads’.
Property investors with portfolios with values exceeding the IHT single/married thresholds of £325,000 and £625,000 are expected to face higher levels of investigation from HM Revenue and Customs.
HMRC is preparing to crack down on trusts and offshore arrangements to reduce IHT from the start of the next tax year following a period of consultation with lawyers and tax advisers.
A top target is likely to be families saving professional fees by administering trusts themselves, as the taxman considers they are the most likely to make mistakes and underpay tax.
IHT channels about £3 billion a year in to Treasury coffers, but the take will rise with property price inflation as the Tories traded off increasing the thresholds as part of their coalition deal with the Lib-Dems.
The thresholds are frozen until the next general election.
Estates currently pay IHT at 40% on asset values exceeding the threshold levels.
The taxman’s strategy could catch thousands of property investing families without effective estate planning.
Many investors who bought property cheaply in the 1990’s are now hitting retirement and are seeking ways to minimise tax by divesting their assets to the children and grandchildren.
HMRC has flagged their increasing interest in trusts and estates by issuing three toolkits for advisers that highlight common errors and indicate how the taxman wants cases handled.
The taxman issues toolkits for guidance on topics likely to come under more scrutiny than others.
“The toolkits highlight the common errors that attract HMRC’s attention and the steps that can be taken to reduce those errors. They can also be used to help demonstrate that ‘reasonable care’ has been taken when preparing returns,” said an HMRC spokesman.
Taking advice from the toolkits is voluntary and the contents have no force in law.
Download the toolkits from these links: