Don’t inherit a pile of trouble
Tuesday, February 10th, 2009
The deadline for paying self assessment tax bills passed at midnight last night. Now experts predict the taxman’s attention may fall on the property market. Conservatives say the Government has a £100 billion ‘black hole’ in its tax account and will try to balance the books by squeezing extra revenue out of areas such as inheritance tax.
HM Revenue & Customs is certainly getting tougher. In December it removed the old limit of 60 days for it to challenge families who say loved ones died leaving estates worth less than the inheritance tax threshold. For deaths after this change it can open an investigation at any point.
Accountants say it is also looking harder to see if people have made ‘gifts of reservation’. This tends to be where older people give their homes to offspring, but still live in them, to try to reduce their estates for tax purposes.
‘This is no time to relax and think issues such as inheritance tax planning aren’t worth tackling,’ says Mile Warburton of accountants Grant Thornton. ‘Waiting for an easier tax regime under a new government is not a good idea as any changes may come too little too late for your own circumstances.’
He also warns homeowners not to think falling property prices might take them out of the IHT net. In fact, a declining market can be bad news for those left to pay a tax bill. HMRC sets the value of a home on the date of its owner’s death. The tax has to be paid within six months even if the property fails to sell. If you can’t raise the money you can apply to pay the tax in annual instalments, but you pay interest until the balance is paid. If you have to drop the price to sell, you still pay tax as if the original figure applied. You can reclaim the difference using IHT38 forms.
The only good news on inheritance tax is last year’s decision to allow couples to pass on any unused tax allowance to their surviving spouse or civil partner. This allows estates worth up to £624,000 to avoid the tax.
This is an article taken from the Mail on Sunday 1st February 2009 by Neil Simpson
