As a bereaved executor, dealing with the aftermath of someone’s passing can be overwhelming. The last thing you want to hear is that HM Revenue & Customs (HMRC) is opening an investigation into your work. The process of sorting through paperwork and finalizing someone’s affairs is already challenging, and the added stress of defending your decisions can be daunting.

Unfortunately, HMRC investigations into inheritance tax (IHT) are on the rise. According to data from accountancy firm Price Bailey, the number of IHT investigations opened by HMRC has reached a six-year high, with an 18% increase from the previous year. These investigations are triggered when HMRC suspects inaccuracies or incompleteness in the IHT return submitted.

Nikita Cooper, director at Price Bailey, highlights that many formal enquiries do not result in additional tax charges, but they do impose a significant administrative and emotional burden on families. If you find yourself under investigation, be prepared to provide detailed evidence to support the asset values and relief claims in the estate.

The scrutiny on IHT returns is also reflected in the rising number of cases referred to HMRC’s compliance team. While the percentage of cases resulting in amendments has decreased, the overall trend indicates a growing focus on IHT by HMRC.

Asset valuations, particularly property valuations, are a common target for investigation. Ian Dyall, head of estate planning at Evelyn Partners, recommends obtaining two independent property valuations to ensure accuracy. Executors should also carefully consider any gifts made by the deceased, keeping accurate records to avoid complications during valuation.

A common pitfall that triggers investigations is the reservation of benefit rules. Executors need to understand that transferring property to heirs while retaining the right to live in it does not remove the property from the estate for IHT purposes. To avoid complications, it’s crucial to adhere to the rules and seek professional advice if needed.

By understanding these rules and maintaining meticulous records, executors can mitigate the risk of investigations and streamline the estate administration process. Planning ahead and staying informed can alleviate stress for both executors and beneficiaries, ensuring a smoother transition of assets.