Bereaved families forced to hand over extra £94,000 in inheritance tax | Personal Finance | Finance
Investigators have been offering big cash rewards to informers in a successful bid to bring in £258 million from inheritance tax dodgers, it has been revealed.
The figure was some £31m – 14 percent – higher than the year before, according to official HMRC data revealed as the result of a Freedom of Information request.
The figures show that the average amount of extra tax collected from each investigation rose to £94,273 in 2023-24, up from £79,315 in 2022-23.
The increase came on the back of a significant increase in the amount of money the HMRC is willing to pay informers.
The taxman shelled out £978,256 to people who provided “actionable intelligence” on tax fraud in 2023-24, up from £508,500 the previous year, according to data obtained from a separate Freedom of Information request.
Details emerged as the Chancellor Rachel Reeves looks to boost government income through changes to inheritance rules which will see more bereaved families lose a chunk of their inheritance.
The changes are expected to a rise in the number of families trying to evade payments, both legally and illegally.
At the same time, the government has signalled a new crackdown on tax dodgers with a move to give the HMRC £1.4bn to hire 5,000 additional compliance staff over the next five years.
Neela Chauhan, of accountancy firm UHY Hacker Young, said: “Taxpayers really resent paying tax on their inheritance – so many try to avoid paying it.
“But with inheritance tax being such a major earner for HM Treasury, there’s a strong incentive for HMRC to keep challenging inheritance tax submissions that it’s suspicious of.
“HMRC’s focus on inheritance tax is yielding a greater compliance take from fewer investigations – a clear sign that their efforts to clamp down on tax evasion are working.”
She told the Telegraph: “The Government’s decision to dramatically increase the range of assets and estates hit by inheritance tax in the Budget could spur a new wave of evasion and avoidance of this tax – creating far more investigations for HMRC.”
Tax crime prosecutions hit a three-year high of 300 in the year to September, up 19pc from 252 in the same period last year.
The number of new tax investigations opened by HMRC during the third quarter of 2024 was 93,000, the highest figure registered in a quarter for three and a half years. The number of new investigations has averaged 78,000 per quarter for the last three years.
HMRC will open an inheritance tax investigation when it believes an incorrect tax return has been submitted.
It is the job of the executor to calculate the value of the estate as well as determining whether inheritance tax is payable and submitting the relevant inheritance tax forms to HMRC.
If they fail to pay the tax within six months of the death, then interest is charged on the late payment. This is 2.5 percentage points above the Bank of England base rate, meaning a total of 7.25 percent today.
Executors also face penalties for submitting inaccurate information – of up to 100 percent of the tax due.
The average inquiry will last for 558 days, during which time the executors are blocked from distributing the estate to the beneficiaries.
The burden of proof will be on the executor to demonstrate they followed the rules, and an inquiry will generally start with HMRC asking for written evidence. But this could then escalate to a house visit from the tax office.
