New HMRC Process For Inheritance Tax Clearance

Her Majesty’s Revenue and Customs (HMRC) has announced that they will no longer issue their standard clearance letter when they have finished their checks. Instead, if you want to apply for clearance, they say you should use Form IHT30 to do so.

Their detailed guidance on the use of IHT30 is as follows:

i) You should only send in IHT30 to apply for clearance if you are sure there will be no further changes to the tax position of the estate. That means that if you are selling a property then you should not submit the IHT30 until you have sold it so that you can be sure whether the sale will affect the tax position or not.

ii) You can also use the form IHT30 to report any changes to the estate.

iii) It is appropriate to apply for clearance after two years have passed since the date of death. HMRC will consider clearance earlier than this, but only if you are sure that there will be no more changes to report. You would normally not be expected to apply for clearance until at least a year has passed since the date of death.

iv) Although you need to tell HMRC about any changes to the estate, if the changes are quite small then you should report them all in one go rather than as they happen. You should do this either when the values in the estate are final or 18 months after the date of death, whichever is earlier.

v) The only changes you need to report before the timescale in iv) above are:

  • changes to the value of land, buildings or unlisted shares
  • if you want to claim relief after the sale of land or shares at a loss
  • after you have sold assets on which you were paying tax by instalments
  • where the total increase or decrease in the value of the estate is more than £50,000, before any exemptions or reliefs
  • HMRC has told you that we are carrying out a compliance check on the estate
  • the person who died made a gift with reservation of benefit or had the right to benefit from a trust when they died

HMRC has said they will not charge a penalty for not reporting the changes provided you follow the guidelines above. If you want to reduce or stop the interest, it is advisable to make a payment on account in advance of reporting the changes.

When reporting any changes, you should make sure you use the correct form from the following:

  • If you are claiming relief on shares sold at a loss within 12 months of the date of death then you need to use Form IHT35 (Claim for Relief – Loss on Sale of Shares)
  • If you are claiming relief on land or buildings sold at a loss within four years of the date of death then you need Form IHT38 (Claim for Relief – Loss on Sale of Land’
  • If you are reporting any other changes to the estate then you need to use Form C4 (Corrective Account)

Note that you may not always get the relief so don’t make any assumptions until your claim for relief has been processed.

Inheritance tax accounts can be quite complicated. Please get in touch if you need help with probate or estate administration.

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