Her Majesty’s Revenue and Customs (HMRC) Trusts and Estates, acting on feedback from the profession, has announced changes to how it processes inheritance tax accounts. The main changes relate to:
1) How long it takes to process the inheritance tax account (IHT400)
2) How long it takes to let you know whether it intends to carry out a compliance check or ask questions about the values in the estate.
These changes are further to the previous procedure that HMRC announced in its Trusts and Estates Newsletter of June 2015 where it confirmed that it would issue the IHT421 probate summary within 10 days of receiving the IHT400.
In more straightforward cases, HMRC will not be looking at the IHT400 in more detail after it has sent its initial calculations.
If HMRC plans to look at the account in more detail then they will give you the specific date, within 12 weeks of issuing their first calculations, by which you will hear from them if they have any questions. That is great news for practitioners who can now assume that if they haven’t heard from HMRC within 12 weeks from when they issued the first calculation, they are in the clear.
HMRC will “aim to tell you” within the 12 week period if there are going to be compliance checks. Similarly, if the Valuation Office Agency (VOA) has any initial questions, HMRC will “aim to ask these before this date.”
According to HMRC, “if you have not heard from us by this date you can assume that we have no questions to ask about the information or values you have given in the form IHT400.”
This is great news and practitioners will breathe more easily knowing that if they have not heard from HMRC within 12 weeks of issuing the first calculation, then you can proceed with distributing the estate with confidence. However, given that HMRC has said they will no longer issue standard clearance letters, you should, as a matter of good practice, submit an IHT30 to apply for a clearance certificate, showing you have paid all the inheritance tax due. HMRC has some guidance for applying for clearance, which you can read here.