Question on IHT Liability on estate

Nearly 5 years ago the client submitted an IHT 400 and gifts schedule to HMRC and requested that they calculate the IHT liability. As the estate was mainly property a 10 year payment plan was established. The executor devise a plan on how to raise the funds to pay off the IHT liability and the funds generated enabled the beneficiary to complete a deed of variation to the will as the money being raised was more than the IHT liability and distributed the surplus funds to other beneficiaries.

The original IHT bill has been cleared, the deed of variation actioned, but when the executor requested an IHT clearance certificate, HMRC flagged, that due to an error in their calculation there was a further large amount of IHT is payable as the gifts schedule appears to have been ignored in the calculation of the original IHT bill.

Does the executor have any course of action they can take, beyond just paying the additional IHT bill plus interest?

The client is in a difficult situation and has raised the following questions:

  • Is there a time limit for IHT claims, when all correct figures were submitted at the outset?
  • Can HMRC charge clients interest on tax due when they were not even aware of the liability, or informed the client of the liability?
  • Has anyone come across this type of situation before?

Can anyone provide any guidance, or direct me in the right direction?

Appreciate any thoughts please as struggling to devise plan here.

The rules are in s240 IHTA 1984. There is a 4 year time limit but a nasty catch is that where instalments are paid it runs from the last one: s240(2)

Jack Harper

Thanks Jack appreciate the reference point.

Seems a little unfair, when client has declared all estate assets correctly and asked HMRC to calculate IHT liability, that tax and interest are payable for 6 months after date of death, as the client had no awareness of the liability. They have made financial decisions based on HMRC calculations and are now left exposed due to an HMRC error/negligence. Fully appreciate, if the client had made a error, they would be fully liable.

Can client challenge on HMRC negligence?