[Politics] Inheritance Tax

[Weststander]

By "non-financial assets" do you mean things like aircraft, yachts, paintings, property, etc. as in non-financial products that hold a monetary £££ account balance? aka fixed assets?

I think we all expect UK property ownership to be of HMRC interest and Land Registry are a feeder to DCDM. I can give you another example within the UK. CAA's Aircraft Register database lists the owner(s) of every UK registered aircraft. On a regular basis (use your imagination) CAA feed data to DCDM for every change in ownership, aka buyers and sellers. Let's say this chap, Joe Bloggs, is now the registered owner of a £2m Lear jet. DCDM will add this to his financial wealth footprint and some background calculations will be done. The simple outcome (there are many, but let's keep this simple) is that DCDM will confirm that Mr Bloggs had alternative wealth that aligned to a £2m aircraft purchase. If not, a risk is raised on the system that Mr Bloggs either used undeclared income or was gifted the aircraft. On the other side of the ledger (the seller) DCDM will check that the receipt of the £2m is reflected in that persons footprint. If lose ends emerge there is potential for investigation.

Anything else of significant value is shared in a similar way within the UK. Veteran and vintage cars are tracked via DVLA V5 registered keepers, changes will be fed to DCDM. I think there is a similar thing in the artworld for very expensive paintings. You can use your imagination to think of other assets that fall in to a similar style of high value.

Every single financial institution in the UK feeds regular data to DCDM - they create a footprint of the overview of your wealth, for everyone, but likely only 1% of the population are likely to have a tax yield gap of significance to interest HMRC. But the 1% membership changes as does the Bar-height for HMRC to trigger investigations.

As for outside of the UK, I'm not privy (above my security clearance) on the detailed content of the data that comes in to HMRC via the reciprocal Tax Treaty countries but I would not be surprised if it is massively different to the type of data in DCDM. Sure some less administratively advanced countries may be less diligent, but if I owned e.g. a property elsewhere in the world (there will be some exceptions obviously) I'd be fairly certain HMRC would know about it even if I haven't told them myself.

Regarding nations sharing info I recall this one from 20 years ago so predating ‘your’ system.

A businessman owned a well known restaurant i.e. a cash business. The French authorities informed HMRC that he’d bought an investment residence there with no borrowing. He then lied to HMRC that it was paid for by a loan/gift from someone in Italy. HMRC checked that with the Italian authorities, it was baseless.

Restauranteur was then taxed on the value as if undeclared takings, plus penalties and interest.

Even after all that he’d look professionals in eye and proclaim his innocence.

 

[dsr-burnley]

Do you think that if IHT was charged at 100% with a NRB of £0, we'd all get used to the idea quite quickly?

I suppose. You're going for the ultra-green ideal of everyone living at subsistence level, with private ownership of assets being all but impossible? (Presumably you would ban overseas ownership of assets as well?)

 

[S.T.U cgull]

By "non-financial assets" do you mean things like aircraft, yachts, paintings, property, etc. as in non-financial products that hold a monetary £££ account balance? aka fixed assets?

I think we all expect UK property ownership to be of HMRC interest and Land Registry are a feeder to DCDM. I can give you another example within the UK. CAA's Aircraft Register database lists the owner(s) of every UK registered aircraft. On a regular basis (use your imagination) CAA feed data to DCDM for every change in ownership, aka buyers and sellers. Let's say this chap, Joe Bloggs, is now the registered owner of a £2m Lear jet. DCDM will add this to his financial wealth footprint and some background calculations will be done. The simple outcome (there are many, but let's keep this simple) is that DCDM will confirm that Mr Bloggs had alternative wealth that aligned to a £2m aircraft purchase. If not, a risk is raised on the system that Mr Bloggs either used undeclared income or was gifted the aircraft. On the other side of the ledger (the seller) DCDM will check that the receipt of the £2m is reflected in that persons footprint. If lose ends emerge there is potential for investigation.

Anything else of significant value is shared in a similar way within the UK. Veteran and vintage cars are tracked via DVLA V5 registered keepers, changes will be fed to DCDM. I think there is a similar thing in the artworld for very expensive paintings. You can use your imagination to think of other assets that fall in to a similar style of high value.

Every single financial institution in the UK feeds regular data to DCDM - they create a footprint of the overview of your wealth, for everyone, but likely only 1% of the population are likely to have a tax yield gap of significance to interest HMRC. But the 1% membership changes as does the Bar-height for HMRC to trigger investigations.

As for outside of the UK, I'm not privy (above my security clearance) on the detailed content of the data that comes in to HMRC via the reciprocal Tax Treaty countries but I would not be surprised if it is massively different to the type of data in DCDM. Sure some less administratively advanced countries may be less diligent, but if I owned e.g. a property elsewhere in the world (there will be some exceptions obviously) I'd be fairly certain HMRC would know about it even if I haven't told them myself.

Very interesting, thank you!

 

[dazzer6666]

By "non-financial assets" do you mean things like aircraft, yachts, paintings, property, etc. as in non-financial products that hold a monetary £££ account balance? aka fixed assets?

I think we all expect UK property ownership to be of HMRC interest and Land Registry are a feeder to DCDM. I can give you another example within the UK. CAA's Aircraft Register database lists the owner(s) of every UK registered aircraft. On a regular basis (use your imagination) CAA feed data to DCDM for every change in ownership, aka buyers and sellers. Let's say this chap, Joe Bloggs, is now the registered owner of a £2m Lear jet. DCDM will add this to his financial wealth footprint and some background calculations will be done. The simple outcome (there are many, but let's keep this simple) is that DCDM will confirm that Mr Bloggs had alternative wealth that aligned to a £2m aircraft purchase. If not, a risk is raised on the system that Mr Bloggs either used undeclared income or was gifted the aircraft. On the other side of the ledger (the seller) DCDM will check that the receipt of the £2m is reflected in that persons footprint. If lose ends emerge there is potential for investigation.

Anything else of significant value is shared in a similar way within the UK. Veteran and vintage cars are tracked via DVLA V5 registered keepers, changes will be fed to DCDM. I think there is a similar thing in the artworld for very expensive paintings. You can use your imagination to think of other assets that fall in to a similar style of high value.

Every single financial institution in the UK feeds regular data to DCDM - they create a footprint of the overview of your wealth, for everyone, but likely only 1% of the population are likely to have a tax yield gap of significance to interest HMRC. But the 1% membership changes as does the Bar-height for HMRC to trigger investigations.

As for outside of the UK, I'm not privy (above my security clearance) on the detailed content of the data that comes in to HMRC via the reciprocal Tax Treaty countries but I would not be surprised if it is massively different to the type of data in DCDM. Sure some less administratively advanced countries may be less diligent, but if I owned e.g. a property elsewhere in the world (there will be some exceptions obviously) I'd be fairly certain HMRC would know about it even if I haven't told them myself.

In reality though, how many of that 1% will actually get investigated? HMRC doesn’t have the manpower to do it….

 

[timbha]

If you are in a family of 4, (which I am in), your family entitlement (from birth) would be 4 houses. That’s one house to live in, a holiday home and two for rent until your kids are old enough to move out and live in them.

In reality though, how many of that 1% will actually get investigated? HMRC doesn’t have the manpower to do it….

AI is the answer.

 

[Westdene Seagull]

In reality though, how many of that 1% will actually get investigated? HMRC doesn’t have the manpower to do it….

I did ( and maybe still am ) and in my case, as executor, we're talking either just below or just over the £1m allowance. HMRC accused me of under valuing properties in the estate. Probate had already been issued when HMRC got involved. Strangely all the properties sold below my estimated value, or more accurately the Estate Agents estimation. If the estate had been charged IHT on the final sale price of assets rather than guessimates no IHT would have been due. HMRC still haven't told me the result of the investigation ( I might still be under investigation for all I know ) - they don't know their arse from their elbow. If IHT must be charged ( and I don't think it should be ) then it should at least be charged on the true value of the estate not estimates.

 

[drew]

If you are in a family of 4, (which I am in), your family entitlement (from birth) would be 4 houses. That’s one house to live in, a holiday home and two for rent until your kids are old enough to move out and live in them.

Bizarre!

 

[A mex eyecan]

I did ( and maybe still am ) and in my case, as executor, we're talking either just below or just over the £1m allowance. HMRC accused me of under valuing properties in the estate. Probate had already been issued when HMRC got involved. Strangely all the properties sold below my estimated value, or more accurately the Estate Agents estimation. If the estate had been charged IHT on the final sale price of assets rather than guessimates no IHT would have been due. HMRC still haven't told me the result of the investigation ( I might still be under investigation for all I know ) - they don't know their arse from their elbow. If IHT must be charged ( and I don't think it should be ) then it should at least be charged on the true value of the estate not estimates.

I and one other act as attorneys and will eventually become executors for an elderly relative who has recently moved from their home and into permanent care.

Once they’ve been in there two or three months we intend to sell the property as attorneys and hopefully get rid before they die so as to avoid probate and all its challenges when a property is involved.

Hopefully things will pan out well enough to get this done as we appreciate we are fortunate to hopefully get this window.

 

[CoolTed]

I did ( and maybe still am ) and in my case, as executor, we're talking either just below or just over the £1m allowance. HMRC accused me of under valuing properties in the estate. Probate had already been issued when HMRC got involved. Strangely all the properties sold below my estimated value, or more accurately the Estate Agents estimation. If the estate had been charged IHT on the final sale price of assets rather than guessimates no IHT would have been due. HMRC still haven't told me the result of the investigation ( I might still be under investigation for all I know ) - they don't know their arse from their elbow. If IHT must be charged ( and I don't think it should be ) then it should at least be charged on the true value of the estate not estimates.

And it seems you can be screwed all ways. If the house sells above the estimation (at time of Probate) then additional IHT can be due. Also, in that same situation, if the sale is delayed and enough time has passed, the Estate can be liable for CGT.

I agree with your point that IHT should ultimately be paid on actuals, but that might be too logical and reasonable for HMRC.

 

[Shropshire Seagull]

I and one other act as attorneys and will eventually become executors for an elderly relative who has recently moved from their home and into permanent care.

Once they’ve been in there two or three months we intend to sell the property as attorneys and hopefully get rid before they die so as to avoid probate and all its challenges when a property is involved.

Hopefully things will pan out well enough to get this done as we appreciate we are fortunate to hopefully get this window.

If the house is owned by the elderly relative I would assume the sale proceeds would go into their estate, and with permanent care, get chewed up in care cost fees?

 

[CoolTed]

I and one other act as attorneys and will eventually become executors for an elderly relative who has recently moved from their home and into permanent care.

Once they’ve been in there two or three months we intend to sell the property as attorneys and hopefully get rid before they die so as to avoid probate and all its challenges when a property is involved.

Hopefully things will pan out well enough to get this done as we appreciate we are fortunate to hopefully get this window.

I think that selling a property before death could mean losing the residence nil-rate band benefit, if that's relevant in your situation.

 

[Shropshire Seagull]

In reality though, how many of that 1% will actually get investigated? HMRC doesn’t have the manpower to do it….

Is the roll of the dice many folk play ....
I should add that HMRC also do a quota of randomly selected investigations as well, so even the small-change tax dodgers might be at risk of an investigation.

In essence, evading taxes is a gamble, you might get caught, you might get away with it.
I expect most of us have experience of e.g. sole traders who may do a bit of cash-in-hand to knock of the 20% VAT.
So, absolutely, HMRC cannot resource to investigate every case. So they do a mix of possible high yield and random.

As Fletcher (from porridge) used to say: "If you can't do the time, don't do the crime."

And HMRC fully endorse the mantra of "Ignorance is no excuse for the law"

 

[BrightonCottager]

I and one other act as attorneys and will eventually become executors for an elderly relative who has recently moved from their home and into permanent care.

Once they’ve been in there two or three months we intend to sell the property as attorneys and hopefully get rid before they die so as to avoid probate and all its challenges when a property is involved.

Hopefully things will pan out well enough to get this done as we appreciate we are fortunate to hopefully get this window.

This is what I'm doing, to pay for the care home fees. Be aware that there's a 'Downsizing allowance' if the homeowner goes into a care home which means that the Residential Nil Rate Band can be preserved. It's a bit complicated but worth knowing about. https://www.gov.uk/guidance/how-dow...ects-the-additional-inheritance-tax-threshold

 

[fly high]

And it seems you can be screwed all ways. If the house sells above the estimation (at time of Probate) then additional IHT can be due. Also, in that same situation, if the sale is delayed and enough time has passed, the Estate can be liable for CGT.

I agree with your point that IHT should ultimately be paid on actuals, but that might be too logical and reasonable for HMRC.

Forty odd year ago friend's father died. He owned both sides of a semi detached house, one half left to my friend the other to his brother. Friend's half had a very large rear garden with access off an unmade lane. HMRC said this should be valued as a separate building plot not the property's garden. Had to go to the expense of getting plans drawn up & submitted for planning permission to prove it wasn't. Lucky for them it was refused but caused loads of hassle & massive delay.

 

[Herr Tubthumper]

I did ( and maybe still am ) and in my case, as executor, we're talking either just below or just over the £1m allowance. HMRC accused me of under valuing properties in the estate. Probate had already been issued when HMRC got involved. Strangely all the properties sold below my estimated value, or more accurately the Estate Agents estimation. If the estate had been charged IHT on the final sale price of assets rather than guessimates no IHT would have been due. HMRC still haven't told me the result of the investigation ( I might still be under investigation for all I know ) - they don't know their arse from their elbow. If IHT must be charged ( and I don't think it should be ) then it should at least be charged on the true value of the estate not estimates.

If HMRC used “true values”, by which I assume you mean what the property sells for, this would be open to abuse. Suppose I own an apartment estimated at 500k which I want to gift to friend A when I die. Using the estimate there’s 50k IHT. Now, suppose I die and my estate sells the apartment to Mr A for £1. Under your proposal the true value is £1 and no IHT is due. I appreciate this is an extreme hypothetical case but hopefully you can see the flaw in your idea?

 

[Weststander]

Is the roll of the dice many folk play ....
I should add that HMRC also do a quota of randomly selected investigations as well, so even the small-change tax dodgers might be at risk of an investigation.

In essence, evading taxes is a gamble, you might get caught, you might get away with it.
I expect most of us have experience of e.g. sole traders who may do a bit of cash-in-hand to knock of the 20% VAT.
So, absolutely, HMRC cannot resource to investigate every case. So they do a mix of possible high yield and random.

As Fletcher (from porridge) used to say: "If you can't do the time, don't do the crime."

And HMRC fully endorse the mantra of "Ignorance is no excuse for the law"

https://www.accountingweb.co.uk/com...isher/hmrc-to-recruit-5000-additional-experts

 

[Westdene Seagull]

If HMRC used “true values”, by which I assume you mean what the property sells for, this would be open to abuse. Suppose I own an apartment estimated at 500k which I want to gift to friend A when I die. Using the estimate there’s 50k IHT. Now, suppose I die and my estate sells the apartment to Mr A for £1. Under your proposal the true value is £1 and no IHT is due. I appreciate this is an extreme hypothetical case but hopefully you can see the flaw in your idea?

As you say - a very extreme example and one that would be picked by the solicitors involved along with Land Registry - and remember the big database @Shropshire Seagull has described that is linked to LR.

The system at the moment means estates get taxed when they shouldn't. Just to use my parents estate for example - all the properties combined sold for more than £100k less than they were valued at. Reason being that each and every one, at point of survey, needed work doing.

Tax of any kind should be paid based on true values. You don't pay a guessimate on VAT, Stamp Duty, Income Tax, Fuel Duty .... why IHT ?

 

[Shropshire Seagull]

If HMRC used “true values”, by which I assume you mean what the property sells for, this would be open to abuse. Suppose I own an apartment estimated at 500k which I want to gift to friend A when I die. Using the estimate there’s 50k IHT. Now, suppose I die and my estate sells the apartment to Mr A for £1. Under your proposal the true value is £1 and no IHT is due. I appreciate this is an extreme hypothetical case but hopefully you can see the flaw in your idea?

When you purchase a house, especially with a mortgage, the surveyor will also provide a typical market value for the property. There are online sites too where property sales values can be searched. Good, local estate agents can also provide a reasonable guide value.

In similar vein, for Council Tax purposes, a historical property valuation (market value back in the day?) is needed. I don't know how it's done, but in your example, a £500k apartment would be "expertly" valued at £500k, maybe plus/minus 5%, but way more than a quid.

My sister-in-law was gifted a house in Burgess Hill about 15 years ago. To calculate CGT, she needed an estimated market value at time of gifting, i.e. what was it worth in 2009. Subtract this from what she sold it for to establish the £££ gain. Subtract the threshold allowance to work out the taxable gain.

I guess the main difference is with CGT you get the wonga in your mitt before the CGT tax has to be paid whereas with IHT you have to cough the tax BEFORE you get any wonga? Have I got that right?

EDIT: I agree with @Westdene Seagull comment above - I would expect the surveyor (or whoever professional is providing the value estimate), to also highlight any work required (obtaining estimates if needs be) and adjust their market valuation accordingly for taxation calcs

 

[sagaman]

Bizarre!

Thats not true

 

[Herr Tubthumper]

As you say - a very extreme example and one that would be picked by the solicitors involved along with Land Registry - and remember the big database @Shropshire Seagull has described that is linked to LR.

The system at the moment means estates get taxed when they shouldn't. Just to use my parents estate for example - all the properties combined sold for more than £100k less than they were valued at. Reason being that each and every one, at point of survey, needed work doing.

Tax of any kind should be paid based on true values. You don't pay a guessimate on VAT, Stamp Duty, Income Tax, Fuel Duty .... why IHT ?

But what is “true value”? It isn’t necessarily the price it sells for.