Land Registry data under scrutiny to check people aren’t avoiding tax, Fenland accountants warn
A FENLAND accountancy firm has warned that HM Revenue and Customs is scrutinising Land Registry data on house purchases and sales to check people are not avoiding tax.
Mark Hildred, managing partner at the firm, which has offices in Wisbech, Spalding and Market Deeping, said: “This is affecting those who receive a gift or inheritance to buy a property, or who use this money to pay a sizeable amount off their mortgages.
“Figures released last month show that HMRC is actively targeting estates and beneficiaries for underpayment of inheritance tax (IHT). Last year, the taxman investigated 9,368 house price valuations and clawed back almost �70million in IHT.”
IHT is levied at 40 per cent where the assets, minus any debt, of a person’s estate exceed �325,000, or �650,000 for couples.
Estate beneficiaries, who are often the children and families of the deceased, face penalties of up to 100 per cent of the additional tax liability, in addition to the tax due, if HMRC investigates an IHT property valuation and finds it is incorrect because sufficient care was not taken in obtaining it.
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If a property is sold for less than the valuation, the estate can come back and ask for the value to be revised. Executors and beneficiaries are being advised to get several valuations from professional valuers or chartered surveyors.
HMRC has said that it would open an inquiry based on a series of risk factors; part of the remit of an inquiry would be to check whether the declared income correlated to the individual’s lifestyle. In the case of gifts, they would look for evidence such as a copy of the donor’s bank statement.
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When giving gifts, it is suggested that donors pay by bank transfer and have supporting documentation to give to their lawyer and accountant, as many people will have no provable record of giving gifts to children or grandchildren.
Gifts of unlimited amounts can be given free of tax if the donor lives for another seven years.