UK: HMRC commits to firm deadlines for IHT400 compliance checks

The new policy was announced in a special edition of HMRC's trusts and estates newsletter published today (16 April 2018). It follows complaints from estate administrators that HMRC often takes too long to process IHT400s, and that it would be useful to know as early as possible whether a compliance check will be required, or whether the IHT400's valuation of the assets is going to be questioned.

The previous procedure, set out in June 2015, stated HMRC's aim of issuing the IHT421 probate summary within ten working days of receiving the IHT400. It would then either clear the IHT400 straightaway, or conduct a 'targeted risk assessment' whose duration would depend on the estate's complexity and value, but which is expected would be within 16 weeks of receipt of the IHT400. Valuations of assets in the estate would be checked at the same time, and the estate administrators would be notified of any extra IHT liability within 20 weeks.

The new system is similar, but sets a more rigid timeline. The IHT421 will still be issued within ten days. If the estate return is not granted immediate clearance, HMRC will give the estate administrator a specific date by which it expects to submit its queries, or to announce that it intends to do a full compliance check. This date will be 12 weeks after issue of the IHT421.

'If you have not heard from us by this date you can assume that we have no questions to ask about the information or values you have given in the form IHT400', says HMRC. The estate administrator can then proceed with the distribution of the assets, if all else is ready.

As a corollary, HMRC will no longer automatically send out standard clearance letters. They will, in future, only be issued if the estate administrator requests one using form IHT30, 'Application for a clearance certificate'. This should only be done once the tax position is definitely established, with no further changes to report, which HMRC expects will be at least a year after the death.

HMRC is also reminding estate administrators to report small changes to the estate position only at the end of the process, or when 18 months have passed since the date of death, rather than every time they happen.

However, some changes do have to be reported immediately, including amended values of land or unlisted shares; a change in the total estate value of more than GBP50,000; where there was a gift with reservation of benefit or a trust; or where a compliance check is in progress.

Sources

• HMRC