I would be interested in the views of others on the following situation. The deceased left an estate of approximately £3 million. She gave some free of tax legacies to non-exempt beneficiaries which exceeded her nil rate band and gave the residue to well known charities. The value of the legacies was grossed up for IHT and the tax paid. I have asked HMRC whether they would be willing to issue a clearance certificate without me having to submit a statement of amendments to the values of the sizeable number of assets which included a large portfolio of shares. However the response I received was that they would like me to do this for sake of completeness. As this exercise would involve quite a bit of time and obviously would cost the charity beneficiaries, I am not inclined to undertake that exercise when at the end of the day there could be no further tax to pay. Am I being unreasonable? Can HMRC insist that I do so?
It has just occurred to me that my posting did not give the full facts. My excuse is that it was in the early days of lockdown No. 1 when I was unable to go to my office and had not set up a work from home arrangement. The IHT 400 had been submitted and payment of the tax on the grossed up legacies had been made. However HMRC issued an assessment asking for a further, I think, £1300 (I am now working from home so I don’t have the paper file to check). As there was an urgency in getting probate, (there was a large valued portfolio of shares which needed to be sold) my colleague, who was looking after matters, paid this on the basis that it would be investigated by me when I returned. Nevertheless there was a delay in the IHT 421 being sent by HMRC direct to HMCTS and then a further delay at that office before probate was issued, about three months from application, if my memory serves me right. On my return, I looked into the matter of the IHT calculation and indeed found that HMRC had made a mistake and that my calculation was correct. I had after all used their own online calculator. I therefore wrote to them and they admitted their error and apologised and said that a refund would be made once I had notified them of any amendments to the value of the estate. As the only tax liability was in respect of the grossed up legacies, I pointed out that there could be no further tax to pay and that I did not see the need to provide them with a statement of amendments, to use their phrase, “for sake of completeness”. That correspondence took place I think in October and I sent a further letter in December but to date no response. I can’t therefore wind up the estate until I get the refund. I am not too bothered about getting an IHT clearance even though 2 of the partners and I are executors. So my question is, are HMRC right in withholding the refund until I provide them with a schedule of amendments? I think not.
As a result of the delay in probate being issued, the shares could not be sold till September and the estate lost some £100k plus compared to the probate value.
Sorry for the length of this.