Don’t forget the valuations on IHT

Since it was announced Aim shares are permitted to be in Isas, the industry has been waiting for inheritance tax (IHT)-free Isas to be set up. But as Peter Nellist points out in the latest in his inheritance tax series, it is necessary to look out for all potential valuation issues before the taxman spots them.

Mr Nellist said, “The onus is on the taxpayer to get the valuation right, with the prospect of additional tax in the form of penalties and interest to pay if mistakes are made, careless or otherwise.”

For example, if a property is marketed and higher offers are received than the probate valuation that was submitted, HMRC will expect all offers to be reported with a view to increasing the initial submitted probate. “This is an area where great care is needed as there is often a counter argument that the market has moved on and the probate valuation submitted should remain in place,” Mr Nellist added.

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There is also the ability to gift on all or part of an inheritance within two years of the death of the person. While the two-year period is set, one area which may catch out advisers is that there is a requirement that the provision does not apply if made for any consideration other than altering the dispositions of the recipients.

Mr Nellist said while there are forms of IHT relief, it is important to remember that there are traps.