HMRC issued IHT clearance and then raised a revised IHT calculation

We are dealing with an estate where land value was renegotiated with the DV, HMRC raised an IHT calculation based on the agreed renegotiated value, we paid the tax and HMRC then issued clearance. HMRC have subsequently raised a revised calculation, whereby a significant amount of additional IHT is due, on the basis that they made an error in their previous calculation. We have been back to HMRC on the basis, aside from anything else, that this is unfair but HMRC say that the additional tax is payable. Does anyone have any experience of dealing with an issue like this?

Lisa Homer
Pickering & Butters

Did you obtain a Clearance Certificate, or just the usual informal letter from HMRC? If the former, there is statutory authority and HMRC cannot wriggle out of it as they are trying to do. If the latter, you must consider the terms of their informal letter but I’d not be optimistic.

Julian Cohen
Simons Rodkin

Is the clearance a formal one on form IHT30, or a spontaneously generated ‘file-closing’ letter from HMRC?

If the former, then in the absence of fraud or failure to disclose, HMRC is bound by the certificate- see sec 239 IHTA. I’ve never been sure about the effect of the file-closing letter, but I imagine
that in some cases it could create an bar to enforcement, if the recipient of the letter had altered his position in reliance of it.

Tim Gibbons

IHTM40001 states:

Non-statutory assurance

You should treat the non-statutory assurance (IHTM40151) given by standard letter SL135 in all respects as if the taxpayer had applied for and you had issued formal clearance on form IHT30. You should therefore consider the instructions in this section before you issue a non-statutory assurance.

Once you have issued a non-statutory assurance you should treat any further developments on the case in accordance with the instructions in this section and on the basis that clearance has been given. This paragraph does not apply to Estate Duty cases.

As the non-statutory assurance letter has the same effect as a formal clearance certificate there is no need for the taxpayer to request a certificate once it has been issued. However, if they choose to submit a form IHT30 you should still issue it if they have paid all the Inheritance Tax that is due.

Paul Saunders FCIB TEP

Independent Trust Consultant

Providing support and advice to fellow professionals

IHTM provides:

Non-statutory assurance para 40001 IHTM]

You should treat the non-statutory assurance (IHTM40151) given by standard letter SL135 in all respects as if the taxpayer had applied for and you had issued formal clearance on form IHT30. You should therefore consider the instructions in this section before you issue a non-statutory assurance.

Once you have issued a non-statutory assurance you should treat any further developments on the case in accordance with the instructions in this section and on the basis that clearance has been given. This paragraph does not apply to Estate Duty cases.

As the non-statutory assurance letter has the same effect as a formal clearance certificate there is no need for the taxpayer to request a certificate once it has been issued. However, if they choose to submit a form IHT30 you should still issue it if they have paid all the Inheritance Tax that is due".

and

" [para 40014] "The clearance certificate means that the taxpayer will not have to pay any further tax on the transfer described in the certificate, unless IHTA84/S239 (4) applies, where

· there has been fraud or failure to disclose material facts (IHTM40143)

· additional assets (IHTM40142) are later shown to have been included in the transfer

· too great an increase in the nil rate band has been claimed on the death of the surviving spouse (IHTM43067)

· further tax becomes payable as a result of statutory amendments after issue (IHTM40147"

Malcolm Finney

I am fairly certain that when HMRC introduced “closure letters” some years ago they said that a closure letter would have the same statutory authority as a formal clearance certificate but I cannot
recall where this was published.

Cliona O’Tuama

Solicitor

Sometimes, to deal with these people, your clients just have to consider legal action or the threat of it. Many will offer pro bono assistance where that is appropriate.

Jack Harper