HM Revenue & Customs  

IHT investigations drop but tax take holds strong

IHT investigations drop but tax take holds strong

The number of inheritance tax investigations opened by HMRC in the past year has dropped by a third as the tax office suspended many investigations during the pandemic. 

Despite this, the amount of additional revenue netted by HMRC stayed strong. 

The taxman opened 3,574 IHT investigations in the year to March 31, 2021, a one-third drop on the figure for 2019-20, when it was 5,638. 

Although there were fewer investigations, the amount of extra revenue collected was £254m, down a mere 7 per cent on the £274m collected in 2019/20.

Tax year

Number of IHT investigations opened

20/21

3,574

19/20

5,638

18/19

5,537

17/18

5,354

16/17

5,138

15/16

5,907

14/15

5,462

13/14

6,088

In April last year, HMRC suspended some investigations into taxpayers as a result of the pandemic.

Sophie Warren, tax manager at Pinsent Masons, said the latest figures showed in spite of the pandemic, HMRC has not shied away from launching investigations into those it believes has underpaid the tax.

She added: “Anyone who knows or suspects they may have underpaid IHT should not wait to be contacted by HMRC. 

“HMRC will look favourably on those who come forward and is likely to have a lower penalty levied as a result”.

But a spokesperson for HMRC said the majority of people pay the correct amount of IHT.

They added: “Investigations are opened into the small proportion of cases where compliance issues have been detected to ensure that everyone pays their fair share of tax. 

“The number of enquiry cases and amount of tax we bring in each year changes as cases are opened and closed, and any tax owed is paid.”

IHT is the tax paid on the estate of someone who has died.

Taxpayers are exempt from the tax if the value of their estate is below a threshold of £325,000, or £650,000 under a joint allowance, or if the estate is left to a spouse, civil partner, a charity or a community amateur sports club.

IHT receipts for the period between April and September this year were up by £0.7bn year-on-year, with £3.1bn collected.

The rise was most likely due to higher volumes of wealth transfers during the pandemic, according to HMRC.

The average inheritance tax bill has now climbed to more than £200,000, according to government figures.

There were 22,100 deaths in 2018-19 that resulted in an inheritance tax bill, and the average bill was £209,502, up 6 per cent from £197,521 the year before, according to HM Revenue & Customs data.

sally.hickey@ft.com