IHT - late disclosure of assets

[sv08enc]

My wife's grandmother died in Scotland 14 years ago, leaving 3 children as her beneficiaries. At the time her estate was valued at £248,000, just below the IHT threshold of £255,000. HMRC confirmed no IHT was payable. The will determined that the house went to my wife's mother and, apart from some shares going to one grandchild, the remaining assets were to be split equally between the 3 beneficiaries. Of the 3 beneficiaries, my wife's aunt died in 2014 and her mother in 2016, leaving just her uncle alive today. HMRC have just issued a IHT bill to my wife and her sister for £72,000 (including £21,000 interest), stating new information has emerged such that their grandmother's estate is now valued at £775,000. The IHT bill also states that the majority of IHT due has been paid. HMRC refuse to disclose many details, claiming confidentiality, but confirmed the additional assets are an offshore bank account in the the sole name of the grandmother. HMRC have also confirmed they became aware of the additional assets in 2015, but gave no explanation why it's taken 3 years to issue their demand to my wife and her sister. Nor will HMRC confirm whether these previously undisclosed assets have been released to the surviving uncle. (We believe that HMRC IHT procedures require all taxes to be paid before approval to transfer assets can be given, but clearly the £72,000 demanded of my wife and her sister remains unpaid). The surviving uncle refuses to discuss the matter in any detail other than to confirm he has paid an IHT bill on the advice of his accountant. His accountant has separately told us that the offshore account was not in the sole name of the grandmother, but in joint names (but would not state who the second account-holder was). The accountant became evasive when questioned whether they were fully aware of the details of the will. My wife's mother received no proceeds from this offshore account and, to the best of our knowledge, neither did her aunt. We know the uncle had power of attorney over his mother's bank accounts in her later years, and strongly suspect he was aware of this account when she died but failed to disclose it. If the offshore account was indeed in the sole name of the grandmother, these assets should have been disclosed 14 years ago and split equally between the 3 beneficiaries, in accordance with the will.

What options are open to us to:
(a) demand full disclosure from HMRC;
(b) dispute the IHT bill on the grounds that none of the newly disclosed assets ever passed to my wife, her sister or indeed their mother;
(c) to pursue the uncle for attempted fraud; and
(d) force the newly disclosed assets to be apportioned in accordance with the original will?

We have no issue paying HMRC if my wife and her sister receive the share of assets rightfully due to them (although we will dispute the interest charges which we believe should be paid by the uncle on account of his failure to disclose). However, HMRC are saying we can only appeal once a settlement has been made, yet they refuse to provide the full details about the assets in question, which seems totally unreasonable.

Thanks in advance.

[AGoodman]

It all sounds rather unfair that you have not been provided with the full details.

I agree the initial step should be to demand full details including a detailed calculation of how they reached the figure including the identification of any joint property.

HMRC can go after people who received assets of the estate (which could include you, indirectly) but they should be first going after the surviving executors, presumably including your uncle? Secondly, you would hope they would go after the joint owner of the account, who would have received the whole on the death, as they have power to do so.

Bear in mind you only have an initial 30 days to appeal against a formal determination (I hope you noted the date of receipt as this is usually very different from the date appearing on the letter). I'd suggest appeal by way of asking HMRC to review it. While demanding more info, I would thrown in human rights arguments by reference to Article 6 - right to a fair trial. Oddly, s.221 which covers determinations, doesn't specify much that has to be included and the list of things that may be included doesn't expressly include the actual assets being taxed.

Fundamentally, given the sum involved suggests it is worth getting some proper advice - a lot may turn on technicalities and the form of the HMRC notice etc.

Incidentally, it is odd the account was not emptied long ago, or at least her name removed. This may mean it was missed entirely or was not joint. I don't think paying the UK tax would be an obstacle form emptying an offshore account.

[sv08enc]

Thanks for the detailed response

To clarify a couple of points: we believe the account was in the sole name of the grandmother, as this is what HMRC have told us. It is only the uncle’s accountant who has suggested it was in joint names. However if it was in joint names, I note you say the surviving account holder would be entitled to receive the full balance. In such circumstances, would the whole value of the account be considered as forming part of the deceased’s estate or just 50%?

The uncle was not the executor of the grandmother’s estate. This was another unrelated gentleman who has since passed away and who was not a beneficiary under the will.

We don’t believe the account was missed, but deliberately concealed by the uncle. Your comment that payment of UK tax would not be an obstacle to emptying an offshore account is concerning - if that’s the case, it’s quite possible it will have been emptied by now.

HMRC did have the opportunity to pursue my wife’s mother as another beneficiary of the estate as they came to know about the account in 2015, but failed to do so before she died the following year.

In any event we will be appealing to HMRC as a priority.

[AGoodman]

Incidentally, if HMRC discovered the account via an automatic exchange of information agreement with another country, the delay is probably due to the fact that they will have mountains of information on foreign accounts held by UK residents. Against that background, and the account holder being dead, 3 years is pretty quick for HMRC.