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Category: Inheritance Tax

End of bulk appeals for tax fines in May

End of bulk appeals for tax fines in May

If you are unlucky enough to be fined for a late filing, then the way in which any appeal can be made changed as of May 7.

Prior to this, HMRC had temporarily reintroduced the ability to bulk appeal late filing penalties for income tax in 2020 and 2021. But from now onwards, all such appeals need to be made individually.

To be fair, if you keep in close contact with your accountant and give sufficient time for all of the paperwork to be done, then you should not be in a position where you are facing a late filing penalty. But if you have either filed paperwork late yourself or had a late filing penalty for some other reason, then each appeal now must be made individually.

Your responsibilities

Even though you use an accountant to deal with your tax liabilities, you are still ultimately legally responsible for the correct and timely filing of your returns. There are several different penalties that could apply too.

Types of penalties

For example, there is an ‘inaccuracy penalty’ which can be applied across specific taxes, including income tax, PAYE, capital gains tax, inheritance tax and corporation tax. This penalty could be anything from 0% to 30% of the extra tax due if the error occurred due to a ‘lack of reasonable care’.

If the error is considered deliberate, this rises to between 20% and 70% of the extra tax due, and if it is both deliberate and concealed, it could rise to between 30% and 100% of the extra tax due.

You could also face a penalty for a failure to notify HMRC of a change in your liability to tax. This could be, for example, if your company makes a profit and becomes liable to corporation tax. Or it could be because your business has reached the turnover for the VAT threshold (£85,000) and you have not registered for VAT.

Other penalties could include ‘Offshore penalties’ and ‘VAT and Excise wrongdoing penalties’ – so it is important if any of these could potentially apply to you, that you speak to your accountant immediately. You can find more information on the types of penalties that could apply on the GOV.UK website.

We can help you meet your obligations

If you think there is a chance that you could fall foul of any of these rules and face a penalty, or that there is any other issue you need advice on to make sure you comply with all your HMRC requirements, please contact us as soon as possible. We will help you navigate any problems that arise.

June 6, 2022

IHT receipts up by £700m – but why you should see this as a ‘voluntary’ tax

IHT receipts up by £700m – but why you should see this as a ‘voluntary’ tax

Inheritance tax (IHT) is one of the most hated taxes there is, mainly because for many people their estate faces a 40% tax rate which is higher than they would have paid during their lifetime.

HMRC’s latest figures reveal there has been a £700m increase in IHT receipts in the financial year to January 2022, with £5 billion going into Treasury coffers. Much of this additional revenue will have come from property price inflation, which has increased the value of many estates, especially as the £325,000 personal IHT allowance has stayed at the same level since 2009. Had it been left to rise with inflation, it would have been worth £428,000 in 2022/23 according to Quilter.

Transfer of allowances

Any remaining allowance can be transferred on the first death between spouses or civil partners, meaning a married couple where the first spouse or civil partner uses none of his or her NRB leaves a £650,000 allowance for the second spouse or civil partner.

The Residence Nil Rate Band (RNRB) of £175,000 is also available – and can also be transferred in the same way as above – but this has added complexity to IHT. In fact, for those who have no children, the RNRB cannot be used at all, which increases the complexity around advising on this.

However, with the average house price now at £288,000 – just £37,000 shy of the £325,000 threshold – many more people look likely to get drawn into this tax net without some prior planning.

You can mitigate this tax

Given the ways that IHT can be mitigated during our lifetimes, this can be considered a ‘voluntary tax’ and one that richer people have been planning to mitigate for years. Yet it is still considered solely a tax on the rich by many, even though those with relatively modest estates that include a property can be caught in this trap.

So, using every available way you can reduce your estate’s exposure to IHT before you pass makes sense, even if you feel you are someone of relatively modest means.

Ways to reduce your IHT liability

There are a number of ways you can lower your IHT bill, including making gifts during your lifetime to reduce your estate to below these thresholds so there is no IHT for your beneficiaries to pay.

You can make gifts to spouses or civil partners without any IHT, but you can also gift up to £3,000 a year to other people using your annual exemption. For a couple, this means they can gift up to £6,000 a year with no IHT impact.

You can also gift unlimited amounts above your normal expenditure, providing it does not alter your standard of living. If you want to make larger gifts, then providing you survive them by seven years, it will be considered a potentially exempt transfer and free of IHT.

If you die within this seven-year period, a tapered amount of IHT would be applied.

We can help you mitigate IHT

There are many more ways you can reduce your IHT liabilities, but IHT planning is a complex area, and you can easily fall foul of the rules without expert help. So, if you would like to find out more about how you can reduce your liabilities for your beneficiaries, then please do get in touch.

March 14, 2022